In light of the most recent financial and banking crisis, more consumers are savvier than ever when it comes to overdraft fees and as such a variety of institutions have come under investigation for potential problems with their overdraft fee practices.

More consumers are now curious about whether or not their bank or credit union might be involved in charging fees for overdrafts in an unethical manner.

Many Banks Under Investigation for Potential Overdraft Fee Issues

PenFed Credit Union is just one of numerous institutions that are being investigated for questionable overdraft practices that put consumers at risk of paying hefty fees when their bank account goes into the negative.

According to the PenFed Credit Union website explanation of their own overdraft fees, an overdraft line of credit gives confidence and safety for overdraft protection on a checking account and uses payments that are based on the amount actually used, not the amount on the total overdraft line. Their website adds that there are no fees to access overdrafts. But it some cases, overdrafts should not be happening at all.

Consumers have expressed confusion over terms such as reordering transactions and available balance, actions that can be used in explanation as to why a consumer was charged a particular amount in overdraft fees. For example, the available balance listed in your mobile banking app or online account doesn’t always mean that all your pending transactions are visible.

The fact that so many consumers can easily access bank balances from their mobile phone makes it simple to have the false sense of confidence that you know exactly what your available balance is. However, the available balance listed on your online bank account is not necessarily the true available balance since there are so many different moving parts, according to bankers who have explained how the process works. Assumptions of monies that don’t exist can lead to an overdraft.

Reordering of transactions in order to leverage maximum overdraft fee collection from consumers is another point being investigated. Reordering transactions is when a credit union or bank processes the transactions from a consumer’s checking account in a different order than the order in which they were made.

This can occur with ATM withdrawals, point of sale transactions for a debit card or with checks.

Every time a customer makes a purchase that overdraws their account, they are charged an overdraft fee – and those fees compound. As these fees await payment, consumers have to pay interest on it and the interest starts accruing as soon as the amount is owed.

The action of reordering transactions has caught the attention of regulators, consumer advocates, and consumers.

How an Overdraft is Processed

According to Smart Asset, one of two things will happen when you attempt to spend from an insufficiently funded account. The first is that the payment will be declined or returned on the spot; in this situation, your bank could charge you a non-sufficient funds (NSF) fee. This could also lead to a fee being assessed by the vendor or merchant that you visited where the transaction was declined. For many credit unions or banks, the overdraft fee is the same thing as an NSF fee.

According to Credit Karma, a bank can charge very high interest rates if they charge the same fee for NSF transactions as they would for an overdraft, which means that many consumers instead go for the next option – overdraft programs that charge direct consumer fees. This second option, if you overdraw your account, is when the bank automatically covers the transaction cost and then charges you a flat fee for doing so.  Overdraft fees usually average between $27 and $34.  Of course, you also have to pay the shortfall that the bank covered.

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.

Learn more by filling out the form on this page.

Learn More

This article is not legal advice. It is presented
for informational purposes only.