While the technical purpose of a bank is to hold clients’ money and provide loans, in the end, banks are in the business of making money. One of the most profitable tools banks use regularly are fees.

Fees are applied for a wide variety of reasons and come in many different types, but one of the most common is an overdraft fee. However, banks and credit unions have come under fire due to allegations that they’ve overcharged overdraft fees. A recent study even showed that banks charge more than credit unions.

The most recent entity to face litigation for overcharged overdraft fees is Bethpage Federal Credit Union. The suit alleges that Bethpage used an “accounting gimmick” to improperly and wrongfully charge their users overdraft fees. According to the suit, there are laws in place limiting the instances in which banks and credit unions can charge overdraft fees, but Bethpage allegedly violated and circumvented these laws in order to overcharge overdraft fees.

What are Overdraft Fees?

Overdraft fees are a specific type of fee charged when account holders spend more funds than they have available. As reported by AARP, before the widespread use of debit cards, banks simply bounced checks when there weren’t enough funds in the user’s account. However, if the account holder has agreed to overdraft protection, now banks will allow the transaction to go through, essentially loaning their client the money to cover the charge. 

This “loan” is accompanied by an overdraft fee which could be substantially higher than the overdrawn amount. For instance, AARP reports an instance in which Regions Bank charged a user a total of $200 in fees for a $3 overdraft.

There is one saving grace for bank users when it comes to overdraft fees. According to NerdWallet, Overdraft Protection Law makes it illegal for banks to automatically enroll their customers in overdraft coverage. Customers must agree to overdraft protection specifically; otherwise, the Federal Reserve declares banks must reject transactions if the customer’s account doesn’t hold sufficient funds.

Overcharged Overdraft Fees

According to the Bethpage overcharged overdraft fees lawsuit, banks and credit unions like Bethpage use a variety of different metrics to judge the amount of funds in a user’s account. Based on these judgments, an account holder may be under the impression they have more money in their account than their bank says they do. This largely comes down to when transactions are considered complete and when funds are considered spoken for by the institution.

According to the suit, Bethpage used strategic transaction timing to charge overdraft fees on accounts that didn’t have negative balances. For instance, the credit union allegedly sets aside funds immediately for incoming debits even though those funds are technically still in the account. They can then use this fund removal to justify the improper overdraft fees.

Overdraft Fees Lawsuits

Plaintiff Jo-Anne F. alleges that she was overcharged overdraft fees by Bethpage CU in 2014, 2015, and 2016. Her lawsuit claims that the plaintiff was charged multiple overdraft fees for the same transaction, something not allowed under overdraft protection. In fact, the suit lists three separate $30 fees charged for the same item in 2016. 

Jo-Anne also alleges she was wrongly overcharged overdraft fees in 2015 when the defendant “pretended that the balance [in her account] was not positive” by placing an artificial hold on a pending debit transaction. A similar overcharged overdraft fee was applied in 2014. The lawsuit says that these examples are just a few of many instances of wrongly applied overdraft fees.

Similar claims regarding overcharged overdraft fees have been filed against Bank of America, Wells Fargo, and TCF Financial, according to reporting by Lawyer and Settlements. Settlements were reached between $22 million and $142 million.

During the coronavirus pandemic, financial situations are worse for many. Two senators are asking banks to stop charging overdraft fees to help the millions of unemployed. If you have been wrongfully overcharged overdraft fees, a qualified attorney may be able to help.

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.