A proposed class action lawsuit alleges that JPMorgan Chase Bank wrongfully charged overdraft fees on pending transactions that didn’t overdraw customers’ accounts at the time of purchase, without contractual authorization to do so.

Plaintiff Jennifer Regala filed the complaint in the U.S. District Court for the Southern District of California on Sept. 24, 2020, claiming Chase routinely charges overdraft fees on what she calls in the suit, “Authorize Positive, Purportedly Settle Negative Transactions.” She asserts claims for breach of contract and violation of California’s Unfair Competition Law, arguing that Chase’s business practices were fraudulent and “likely to mislead the public.”

Regala contends in the suit, “Chase’s customers have been injured by Chase’s improper practices to the tune of millions of dollars bilked from their accounts in violation of their agreements with Chase.”

Suit Alleges Chase’s Pending Transactions Fees Practice Has No Justification Other than Maximize Revenue

Regala says in the complaint that Chase wrongfully charged a $32 overdraft fee for pending transactions on accounts with positive funds, which the bank is not contractually authorized to do. She argues, “There is no justification for these practices, other than to maximize Chase’s overdraft fee revenue.”

According to the suit’s allegations, Chase will authorize a pending transaction and set aside funds for it, resulting in an “available balance” that shows the subtracted amount. Although there may be sufficient funds at the time of the transaction, Regala contends that Chase assesses overdraft fees on the same authorized transaction once the account supposedly settles into a negative balance days later, despite funds having been available at the time of purchase. 

Regala argues that Chase exploited its contractual discretion and that the contracts fail to define the terms “hold” and “to cover” in connection with pending transactions. She claims there is a “vast discrepancy” between Chase’s account documents and practices.    

The complaint states, “Reasonable consumers would not agree to open Chase checking accounts or would not agree to opt-in to Chase’s overdraft services, if they were informed, for example, that they could incur overdraft fees on transactions that did not overdraw their account.”

Are Banks Allowed to Charge Overdraft Fees?

According to Bankrate’s 2019 study, the average overdraft fee was $33.36.

While a bank is allowed to charge overdraft fees if a customer consents to enroll in the services, unfair or deceptive banking practices are prohibited. In some cases, banks may also be in breach of their own contracts if their overdraft fee practices do not adhere to the terms agreed to by the customer.

In 2018, there was even a proposed legislative action underway to curb excessive overdraft fees.

CFPB Enforcement Actions Involving Overdraft Fees

The Consumer Financial Protection Bureau (CFPB) takes enforcement action to protect consumers from becoming victims of deceptive overdraft fee practices by banking institutions.

Under the CFPB’s regulations, a banking institution is not permitted to assess an overdraft fee for certain types of transactions without providing their customer a written notice describing the overdraft fee service and giving them an opportunity to consent or opt-in. The customer must subsequently receive a confirmation notice of the consent from the bank, which states the customer has the right to revoke their consent.

In one recent enforcement action involving deceptive overdraft fee practices, the CFPB settled with TD Bank in August 2020 for $97 million in restitution, in addition to a $25 million civil penalty. In a 2018 action, the CFPB reached a settlement with TCF National Bank to resolve claims that TCF obscured overdraft fees and made consenting to them appear mandatory in order to open an account.

Can I File a Lawsuit for Wrongful Overdraft Fees?

If your bank wrongfully charged you overdraft fees on pending transactions, you may be able to file a lawsuit or join a class action lawsuit. An attorney who handles class action lawsuits can best advise you of your legal rights and remedies.

The Chase Overdraft Fee Lawsuit is Regala v. JPMorgan Chase Bank, N.A., Case No. 3:20-cv-01910-JM-MDD in the United States District Court for the Southern District of California.

Join a Free Bank Overdraft Fee Class Action Lawsuit Investigation

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. Learn more by filling out the form on this page.

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