Can Banks Reverse NSF Charges?

Bank NSF fees are common practice at banks, and while they are annoying, the charges are not illegal. Non-sufficient funds fees, known as NSF fees, have seemingly been around forever and are growing exponentially, according to CNBC.

But many consumers may not know that in some cases banks can reverse overdraft or NSF charges.

These and other bank fees represent a significant profit center for banks and credit unions. The Center for Responsible Lending illustrated the high cost of NSF charges for Americans, noting that in 2017 alone, banks worth over $1 billion collected more than $11.45 billion in overdraft and NSF fees.

This figure is up from previous years. The Center for Responsible Lending alleged that many of the country’s largest banks use tactics that are considered abusive in their attempt to make the largest profit possible. These tactics can include, among others, reordering transactions to maximize the number of transactions that hit when an account is in overdraft, or charging multiple NSF or overdraft fees on one transaction. Banks may also intentionally make their overdraft and NSF fee policies misleading, hoping to trap unsuspecting consumers into incurring fees.

In April 2020, early in the coronavirus pandemic, lawmakers urged banks to stop charging overdraft fees or NSF fees during the COVID-19 crisis. According to letters to banks sent by Sens. Cory Booker and Sherrod Brown, halting these fees would allow Americans to weather the stress of the pandemic. Although NSF fees are usually about $30, they can easily stack up to cause significant financial stress if multiple fees are charged.

The senators reportedly sent letters to 15 banks: Ameris Bank, Bank of America, BankPlus, Citi, HSBC, JPMorgan Chase, Ocean Bank, PNC Bank, Regions Bank, TD Bank, Truist Bank (BB&T and SunTrust), U.S. Bank, Wells Fargo, and Woodforest National Bank. These banks reportedly rank among the top financial institutions in the country when it comes to fee revenue. Some of the banks rank highest in the amount of overdraft and NSF fees collected per account, according to CNBC.

Sens. Booker and Brown argue that federal authorities such as the Federal Deposit Insurance Corporation (FDIC) have recommended that banks stop these fees in order to protect consumers suffering financial hardship due to the novel coronavirus outbreak.

“[T]he agencies encourage financial institutions to work with affected customers and communities, particularly those that are low- and moderate-income,” the FDIC wrote in its statement. “The agencies recognize that such efforts—when consistent with safe and sound banking practices and applicable laws, including consumer protection laws— serve the long-term interests of these communities and the financial system.”

There are ways to avoid NSF fees, although they may seem like an unavoidable reality for many consumers, and the frequency with which banks assess them is relatively new. Just two decades ago, NSF fees were quite rare.  Banks and credit unions seldom used to charge these fees, instead considering covering overdrafts as a rare convenience offered to consumers who inadvertently overdrew their accounts. Nowadays, these fees are all too common.

What Are NSF Charges?

So what are NSF charges, exactly, and how are they different than other bank fees?

Non-sufficient funds (NSF) fees are charged to accounts with a balance that’s insufficient to cover transactions, meaning they are overdrawn. They can also be assessed what is referred to as a “bounced” check.

NSF charges are different from overdraft fees, which are assessed when the bank honors payments from accounts with insufficient funds, typically under what’s commonly known as an overdraft protection program. By contrast, a person is hit with NSF charges if a presented payment is returned because of insufficient funds—and the transaction doesn’t actually go through.

NSF fees in particular face a lot of backlash from consumer advocates who argue that since fees are usually fixed amounts, customers are in essence paying charges that amount to extremely high interest rates on deficits that are generally very low.

How Many Times Can a Bank Make NSF Charges?

Some consumers claim that their banks have charged multiple NSF fees for a single transaction that doesn’t go through. Plaintiffs have filed class action litigation over these claims.

According to plaintiff Somario A., Bank-Fund Staff Federal Credit Union (BFSFCU) has long had a policy of assessing its customers with multiple NSF fees for a single failed transaction. The lawsuit claims that BFSFCU has a regular practice of assessing these fees even when a transaction did not actually overdraw the account.

One of the worst things about NSF fees, along with overdraft fees, is that the charges have the greatest impact on those who are already struggling financially, as these consumers are more likely to have a low balance in their account. NSF charges and overdraft fees, particularly when assessed multiple times on a single transaction, can have a devastating financial impact on these Americans.

How Are Banks Overcharging These Fees?

There are a number of banks who have reportedly been charging consumer multiple NSF fees for a single transaction. Banks go about doing this in a couple of different ways, according to some recent lawsuits.

One lawsuit alleged that an institution submitted a failed transaction repeatedly, despite there not being sufficient funds in the account. According to the plaintiff in the lawsuit, for every time the transaction failed, the bank would hit the consumer with an NSF fee. The customer alleged in his complaint against the bank that he was never informed that he could receive more than one NSF fee for a single transaction.

According to the Center for Responsible Lending, another way banks can charge multiple or excessive NSF fees is by reordering a customer’s transactions. According to the Center, a bank may decide to count larger transactions first, rather than going in chronological order, resulting in non-sufficient funds and the accompanying fee. A consumer may think that they have enough money in their account, but end up with unexpected fees at the end of the day.

In addition, the Center reports that banks may use NSF and overdraft fees themselves to trigger additional charges when consumers don’t get money into their account fast enough to pay the fee.

The Center for Responsible Lending says that more consumer friendly banks simply decline transactions when there are not sufficient funds in an account; however, many still assess fees of $35 or more on unwitting consumers.

Can Banks Reverse NSF Charges?

In some cases, banks can indeed reverse NSF charges. The most important thing in this process is acting quickly—as soon as you’ve found out about the charge. First, fix your account’s deficit as soon as you notice it. Then, call the bank and request that the NSF charge is waived. Acting quickly, fixing the deficit, and immediately getting in touch with the bank will ideally demonstrate that you can in fact stay in control of your finances and that reversing the fee is not a risk on their part.

When you call your bank, it’s important to keep two things in mind. Remain calm and polite; building rapport with the representative is important. Also, position this incident as an isolated one to call attention to the fact that this is not a recurring problem. If you have been a customer with the financial institution for a long time, emphasize this longstanding relationship.

Should You Dispute NSF Charges?

Sometimes, a person is hit with NSF charges because of an error on their part, such as miscalculating the account’s balance or forgetting about a recurring payment. Other times, it may be a bank error, such as a technical glitch or documentation issue. In both cases, you can dispute the NSF charges.

Unfortunately, not all bank fees are so easily reversed—especially if the bank or credit union that assessed the fees is using unfair or deceptive practices to maximize profit by trying to squeeze the most money possible out of customers.

Filing an NSF Charges Lawsuit

A growing number of consumers are alleging that financial institutions are assessing unfair NSF fees and other charges. Toronto-Dominion Bank, known as TD Bank to consumers, recently agreed to settle one of these cases for $41.5 million. The NSF fees class action lawsuit against TD Bank accused the company of churching multiple NSF fees to consumers for a single transaction.

If you believe you have been hit with unfair NSF fees by your bank or credit union, you may be able to join this class action lawsuit investigation.

Litigation can often be a daunting prospect, so Top Class Actions has laid the groundwork by connecting you with an experienced attorney. Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

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