Banking customers can be affected by their bank or credit union’s overdraft protection in either good or bad ways. While overdraft protection is supposed to prevent embarrassing mishaps like debit card decline, it has been alleged that many banks and credit unions abuse this policy to maximize fees against consumers. This means that even though banks and credit unions stay in the overdraft limit, consumers may be getting hit with unfair overdraft fees.

New York Community Bank is one of several financial institutions whose overdraft practices are being investigated. New York Community Bank promotes itself as one of the largest thrift in the United States and one of the leading thrift depositories, and have 233 locations across the country.

Problems with Overdraft Practices

In April, chief executives of seven of the largest banks in the United States had met with members of the House Financial Services Committee to discuss various issues like executive pay to banks, policies on gun transactions, and overdraft policies. In particular, the banks’ reported practice of reordering customer transactions to maximize overdraft fees.

Banks reportedly argued that overdraft protection allowed customers to make purchases despite insufficient funds and that customers are free to opt out of the policy at any time. However, Representative Carolyn Maloney, Brad Sherman, and Ayanna Pressley argued the reordering of debit transactions is not necessary.

Some banks process incoming transactions in the order of largest to smallest, instead of chronological order. This overdraft practice increases the likelihood of maximum overdraft fees.

According to a 2016 report from Pew, 40% of banks reportedly process transactions from largest to smallest dollar amounts instead of chronological order, which often impact customers who are “financially vulnerable. This reflects other sources, which have found younger people or lower socioeconomic citizens often face the brunt of overdraft fees.

Representatives Maloney and Sherman reportedly tried to get the support of CEOs in their bid to make reordering transactions illegal, or at least not be opposed to the legislation.

While there is legislation currently in place that protects consumers, it does not cover everything. Since 2010, banks must get their customers’ affirmative consent before charging them overdraft fees on ATM and one-time debit card transactions. For other types of transactions, banks often exercise discretion over whether or not to pay the overdraft and assess the fee.

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.