Advocates for banking consumers are concerned that the Bank of Hope, headquartered in the greater Los Angeles area, may be engaged in overdraft abuses. The Bank of Hope identifies itself as one of the principal Asian-American financial services enterprises in the U.S.

Specifically, it strives and has served a very prominent Korean-American community for the better part of four decades, according to the bank’s website. Nevertheless, like many banks and credit unions throughout the country, behind-the-scenes practices leading to overdraft abuses can spell trouble for the institution’s patrons.

Do Banks Have a Motive in Getting You to Overdraft Your Account?

In the age of the quick online balance check by consumers, it has become more and more difficult for financial institutions to clear a profit. This is because immediate awareness of account balances lead customers to overspend their account resources less.

According to The Balance, prior to July 2010 and the passage of a federal law which was new at the time, overdrawing your account would cost you the average charge of $35 because of overdraft protection—a service added on by the bank. You wouldn’t have a say in the matter. After the law passed, overdraft protection for ATM withdrawals and point-of-sale debit card transactions now has to be specifically offered and a patron has to opt-in to get it.

Without overdraft protection, ATM withdrawals and point-of-sale debit card transactions are rejected for a lack of funds. Hard-copy checks and ACH transactions can bounce back to the payee and incur a returned check fee from them as well as a non-sufficient fund fee (NSF) from your bank.

Sometimes bounced checks affect your credit score. Avoiding multiple fees, embarrassment, and credit score problems are on the plus side of overdraft protection, as indicated by The Balance.

Where it gets dicey for the patron and profitable for a bank is when you maintain lower balances and they can engage in overdraft abuses like transaction reordering to keep you chasing your financial tail. Transaction reordering is processing a group of transactions against the account from largest to smallest rather than in the chronological order in which they typically come to the bank.

This behind-the-scenes practice ensures a customer with a smaller balance as her or she approaches payday gets to zero faster. It ensures at least one if not multiple overdraft fees.

As an example, a patron may have a $150 in his account and a $50 transaction followed by a $40 and $125 one comes in. The first one to be processed will likely be the $125, bringing the account to $25. The next one to be handled will likely be the $50 one, bringing the account to negative $25 and incurring an overdraft fee if opted in. Finally, the $40 charge is likely processed and incurs yet another overdraft fee leading to a balance of negative $65.

According to the Center for Responsible Lending, the Consumer Financial Protection Bureau (CFPB) made a Spring 2018 announcement that it will halt its plans for new regulations that would have curbed the banking industry’s abusive use of various overdraft fee maximizing techniques.

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.