NSF Charge Lawsuit Brought Against Umpqua Bank

If you haven’t spent much time looking into the specifics of overdraft protection offered by banks, you may expect it to be a harmless and helpful service. However, banks can use overdraft fees and insufficient funds charges, also known as NSF charges, to take advantage of account holders in order to pad their bottom line.

According to a class-action suit brought against Umpqua Bank regarding their improper NSF charge practices, overdraft and NSF fees are “among the primary fee generators for banks.” In fact, the suit states that banks made roughly $35 billion from overdraft fees in 2018 alone. Considering the massive amounts of profit available for banks who improperly apply fees, it’s no surprise that litigation regarding the application of overdraft and NSF charges is common, according to the suit.

What is an NSF Charge?

When an account holder tries to spend money that isn’t available in their account, there are two different types of fees that may occur: an overdraft fee and an NSF charge.

NSF is short for non-sufficient funds and is when an account doesn’t have enough money in it to pay for the check written against it, according to Bankrate. An NSF charge is applied when a check is “bounced” by the bank. Additionally, NSF charges can be particularly high, around $35 per item on average.

An NSF charge differs from an overdraft fee which is incurred when an account is overdrawn and the bank completes the payment covering the negative balance. Overdraft fees are a part of overdraft protection, an option offered by most banks. It is an opt-in offering.

If and only if an account holder has agreed to overdraft protection may a bank may complete transactions when the account holder has insufficient funds and subsequently charge them fees for that completion.

According to Nerdwallet, the Federal Reserve states that banks must, by default, reject transactions if the account has insufficient funds. This rejection would then lead to an NSF charge in most cases.

Duplicate NSF Charge Allegations

Based on the definitions laid out above, one would expect account holders who have agreed to overdraft protection not to be charged an NSF charge when a debit is carried out despite insufficient funds. Similarly, if an NSF charge is applied, you may assume that the account in question is not covered by overdraft protection and thus will not incur any overdraft fees. Despite this, the suit brought against Umpqua alleges that an account holder was charged multiple overdraft charges for the same item on the same account.

According to the NSF lawsuit, Umpqua has been charging account holders “an overdraft fee and an NSF fee” instead of charging “an overdraft fee or an NSF fee” (emphasis in original) as was described in Umpqua’s Account Agreement.

“If a check, item or transaction is presented without sufficient funds in your account to pay it, we may, at our discretion, pay the item (creating an overdraft) or return the item for insufficient funds (nonsufficient funds – NSF),” the account agreement reads.

Plaintiff Shante H. alleges that this duplicate NSF charge is exactly what happened on her account. Her lawsuit lays out two examples but states that further impropriety would likely be found if full access to Umpqua’s records was granted.

Shante claims that she was charged two separate fees for a $2,218.26 rejected transaction made in April 2019. According to the claim, an NSF charge of $35 was applied on April 1 when the transaction was rejected originally. However, an additional “overdraft fee” was charged on April 4 for the same item when the bank decided to carry out the transaction.

The lawsuit alleges that the original charge was rejected “in bad faith” causing Hayes to receive an NSF charge. When the bank then decided to pay the item, they charged a second fee.

The NSF fees lawsuit is Case No. 3:20-cv-00684-AC, filed in the United States District Court of Oregon – Portland Division.

Join a Free NSF Fee Class Action Lawsuit Investigation

You may qualify to join this NSF fee class action lawsuit investigation if you were unfairly charged NSF fees by one of these banks:

• Bancfirst
• Bell Bank
• Busey Bank
• Center Bank
• CenterState Bank
• Flagstar Bank
• Glacier Bank Wings Federal Credit Union
• Midwest One
• NBT Bank

Learn More