After settling an overdraft fee lawsuit several years ago, Umpqua Bank of Portland, Ore. is among several financial institutions under investigation for potentially deceptive overdraft fee practices.

Back in 2014, Umpqua Bank agreed to a $2.9 million class action lawsuit settlement to resolve allegations the company changed the order to post debit card transactions in a way that maximized the number of overdraft fees the bank collected.

At the time, the bank also was accused of regrouping transactions that were made on different days before placing them all from highest to lowest dollar amount.

The financial institution is not alone in being accused of manipulating transaction order from the highest to the lowest dollar amount in an effort to rake in more overdraft fees. Umpqua insisted their postings of transactions was a legal maneuver, but plaintiffs alleged the reordering of transactions was never disclosed in the outline the bank published regarding overdraft fees, which resulted in deceptive and unfair practices.

By posting transaction in a high-to-low order, a bank or credit union can make money by charging an average $35 overdraft fee on several small transactions instead of one overdraft fee that would be charged to one more expensive purchase. This is what Pew Charitable Trusts found, according to a report by the New York Times, when the non-profit research agency conducted research a few years ago.

Even though reordering transactions is not illegal, many consumers have filed lawsuits alleging the financial institutions never disclosed that transactions would be processed in a different order than they occurred.

Overdraft Fee Lawsuit Settlements

Most people who have incurred many overdraft fees each year are the consumers who already live paycheck to paycheck. Even one overdraft fee can feel like a kick in the stomach, but two or three or more can feel like you’ve been hit with a wrecking ball. It’s hard to bounce back financially when you already are struggling and then are forced to come up with even more money to just cover the overdraft fees.

History shows that when faced with an overdraft fee lawsuit, many financial institutions would prefer to settle rather than go through the time, expense and uncertainty of going to court.

In 2010, the Federal Reserve changed the laws governing overdraft protection. Instead of automatically opting in every customer to overdraft protection programs, the customer has to choose to receive overdraft protection for ATM withdrawals and point-of-purchase debit card transactions. This means if you do not choose to have overdraft protection, you could experience a purchase being declined if your account lacks sufficient funds.

According to Nerd Wallet, any automatic bill payments or checks are not part of the optional coverage, and as such, may still lead to overdraft charges when not enough funds exist in the account to cover these types of transactions.

After years of facing lawsuits regarding the reordering of transactions, some financial institutions have actually adopted a low transaction amount to high transaction amount to help alleviate the pressure on customers. According to Pew, the banks that have started the low to high sequencing include Citibank, Ally Bank, U.S. Bank, and Key Bank.

If you were charged overdraft fees or NSF fees by your bank or credit union that you believe are improper for any reason, the attorneys who work with Top Class Actions are ready to investigate these fees on your behalf.

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This article is not legal advice. It is presented
for informational purposes only.