A number of credit unions are being investigated for potentially using deceptive overdraft practices, including New York’s State Employees Federal Credit Union. If you believe you have been hit with unfair SEFCU overdraft fees, you are not the only one.

Credit unions offer overdraft protection programs as ways to help ensure that consumers can successfully make transactions, even when they overdraw their accounts. While credit unions are required by law to make these overdraft programs voluntary, allowing customers to opt in or out, some credit unions may not adequately inform customers of the program’s details. Some are even accused of using deceptive practices incur overdraft charges more often than they should be, even when customers believe they have enough money in their account to cover a transaction.

What is Overdraft Protection?

Overdraft protection programs are offered to customers when they sign up for their accounts and purportedly seek to help them by protecting them from being unable to make transactions when they overdraw their account. In return for allowing the transactions to be made, customers are charged a set overdraft fee, often around $35.

Overdraft fees, including SEFCU overdraft fees, are a major source of revenue for financial institutions, and the number is only climbing. Banks and credit unions bring in billions of dollars each year through overdraft fees alone. And unfortunately, these fees can harm those who can least afford them, disproportionately hitting young people, low-income consumers, and minorities. Being hit with unnecessary, unexpected, or excess overdraft fees—especially when they compound—can make an already difficult financial situation even worse.

“It is a harmful practice that can make one overdraft turn into five, six, seven overdraft fees,” according to Thaddeus King, an officer with the Pew Charitable Trusts’ consumer finance project, speaking to the Detroit Free Press.

Deceptive Overdraft Practices

Even within the terms of their overdraft protection plans, some institutions may use certain practices to wring the most money they can in overdraft fees out of their customers.

A Consumer Financial Protection Bureau report showed that low-income consumers may be hit with $400 or more per year in overdraft fees. How can this happen? In some cases, consumer accounts may simply be too low, consistently incurring fees. But in some cases, SEFCU overdraft fees or fees from another credit union may be maximized by the way the credit union implements them.

Credit unions may process transactions out of chronological order, putting the largest transactions through first, which makes each subsequent transaction more likely to incur a fee than the last. Since fees compound, this can ultimately result in a higher overall charge. In some cases, banks may never have properly explained how their overdraft program worked, or may even have failed to inform customers that they are able to opt out of the program entirely.

Some credit unions may even use the controversial overdraft practice of using a customer’s available balance as the basis for charging overdraft fees, rather than the actual balance. Since the available balance is often lower—a transaction may be authorized but not yet paid, for instance, or a deposit may not yet be credited—customers may end up being charged overdraft fees even when there is enough in their actual balance to cover a transaction.

A number of financial institutions have been hit with lawsuits over unfair overdraft practices. Lawsuits filed against two Michigan credit unions—Advia Credit Union and United Federal Credit Union—are seeking class-action status. According to the Advia lawsuit, Advia hit customers with overdraft fees even when there was enough money in their account to cover the transactions. The plaintiff alleges that, at one point, a $7 debit card transaction led to a $32 overdraft fee from Advia—even though she still had $23.48 left in her account.

Filing a Lawsuit Over SEFCU Overdraft Fees

If you believe you have been affected by unfair or deceptive SEFCU overdraft fees or similar practices at another credit union, you may be able to join this class action lawsuit investigation. A lawsuit may be able to help compensate for SEFCU overdraft fees and other damages.

You may have a legal claim if your were charged excessive overdraft fees by one of these banks or credit unions:

• Alliant Credit Union
• Astoria Bank
• BECU (Boeing Employees Credit Union)
• Nationwide
• Pacific Western
• Patelco Credit Union
• State Employees Federal Credit Union (SEFCU – New York)
• Sterling Bank
• Educational Employees Credit Union (California)

Fill out the form on this page now for a free, immediate, and confidential case evaluation.

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