Consumers who bank at Patelco Credit Union may be getting hit with unexpected fees due to Patelco overdraft protection practices.

Patelco is one of several banking institutions that are currently under investigation for their overdraft practices. These institutions are suspected of engaging in unfair and deceptive practices such as processing transactions out of order so as to increase the number and frequency of overdraft fees that are charged.

In addition, banks and credit unions have been raising these fees in order to maximize revenues – at consumers’ expense.

About Overdraft Fees

Overdraft fees are similar to “non-sufficient funds” (NSF) fees that are charged when a consumer “bounces” a check. The difference is that overdraft protection pays the transaction, instead of denying payment as with an NSF transaction. In the past, bounced checks could have serious consequences: penalty fees could be charged by both the merchant and the bank, and the writer of the check could be at risk for criminal charges as well.

Today, programs such as Patelco overdraft protection protect consumers from being “caught short” by covering purchases or other transactions when there are not enough funds in the account to cover it. Usually, the institution either transfers the money from another account or extends a line of credit.

An Example: Patelco Overdraft Protection

On its website, Patelco Credit Union offers a few different options. One form of Patelco overdraft protection allows depositors to link “backup” accounts. Then if the customer’s checking account does not have sufficient funds to cover a transaction, money is transferred from a designated account in order to cover the transaction. The website description states that it is a “…great way to avoid overdrawn accounts, overdraft charges and late fees.”

Another program is the Patelco Overdraft Protection Line of Credit. This is essentially a short-term loan to cover transactions when there is a shortage in the customer’s checking account. According to the website, this program comes with “no monthly, cash advance or usage fees,” though interest is charged on the amount that is advanced.

In 2016, the Credit Union Times reported that Patelco had “eliminated 39 different fees,” which meant a reduction in revenue of as much as $1 million.

Making Up for Lost Revenue

Since the advent of online banking and increasing use of debit cards, fewer consumers have been overdrawing their checking accounts. In an attempt to make up of these lost revenues, banks and credit unions have engaged in a number of strategies. One of these has been to raise their overdraft fees. Another questionable practice has been to rearrange the transactions in such a way that an overdraft fee is more likely to be incurred – for example, processing later, but higher amount transactions first. Some consumers have also reported being charged multiple times for each transaction debited against the overdrawn account.

In August of 2010, the CFPB issued a new rule that prohibited financial institutions from charging overdraft fees unless a customer gave express consent to participate in a program like Patelco Overdraft Protection. The problem is that many of these institutions have reportedly been abusing that consent. Several banks and credit unions are currently being investigated for these abuses, and part of the outcome may be additional regulation to protect patrons.

If you were charged unfair overdraft fees by your bank or credit union, you could be eligible to participate in a FREE class action lawsuit investigation. If you qualify, an attorney will contact you to discuss the details of your potential case at no charge to you.

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

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