Returned Payment Fee Policies May Be Deceptive and Harmful

Banks that charge a returned payment fee on certain transactions may be utilizing deceptive practices to maximize profits from those fees.

A non-sufficient fund fees, or a returned payment fee, can be charged when an electronic bill payment (such as for a gym membership, insurance, credit card payment, etc.) or electronic transfer transaction is rejected by the bank due to an insufficient balance in an account. These fees may be around $30 and are charged by the bank when it rejects certain transactions.

Returned payment fees are different from overdraft fees. While overdraft fees are charged in order to allow a transaction to go through which would otherwise put the account negative, returned payment fees are charged when a transaction is rejected entirely. Additionally, overdraft fees are only charged when a consumer has opted into overdraft protection from their bank, while returned payment fees can be charged to any customer based on bank policies.

The Consumer Financial Protection Bureau (CFPB) has even clarified the issue, stating in while consumer have to opt into overdraft protection, “banks and credit unions are allowed to charge you overdraft fees when the bank or credit union pays a check or certain recurring electronic payments that would have overdrawn your account, even if you did not opt in.”

Unfortunately, these returned payment fees can add up. After a payment is returned and a fee is charged, the bank will typically try to process the transaction again in a few days. This may happen repeatedly, leading to $100 or more in non-sufficient fund fees.

For example, Bank of America policies allow for up to four returned item fees in a single day for consumer accounts and up to eight returned item fees a day for small business accounts. Charging this many fees a day helps banks such as Bank of America to rake in significant profits.

Although it is not illegal for banks to charge more than one returned payment fee, consumers argue that banks rely on deceptive practices and abuse the system to charge excessive fees to their customers. Banks such as Bank of America face legal action regarding their non-sufficient fund fee practices from consumers who are fed up with allegedly being taken advantage of by bank policies.

One customer states in their class action lawsuit filed against Bank for America that “it is illogical, unconscionable, and a breach of the Bank’s contract for it to charge NSF Fees—which are a charged to compensate the bank for the ‘trouble’ of sending back a transaction for which there are insufficient funds—for the privilege of rejecting a transaction to itself, when it knows that the effort will be futile before it even undertakes the transaction.”

The plaintiff in the returned payment class action lawsuit was allegedly charged $70 for two non-sufficient fund fees after she attempted to make a $60 credit card payment from her Bank of America checking account. The fee was rejected the first time – reportedly earning the plaintiff one $35 return payment fee. A few days later, she says Bank of America tried to process the transaction another time. It was rejected and another fee was charged. Bank of America allegedly tried to process the transaction a third time and it was paid, but the plaintiff was charged an overdraft fee of $35.

In total, the plaintiff says she was charged $105 due to unfair Bank of America policies which allowed excessive fees for a single $60 transaction.

Some consumers claim that charging repeated non-sufficient fund fees are a violation of bank policies. These allegations argue that, while bank policies state that a bank “may” attempt to process a transaction multiple times, the agreements do not state that the bank will always process the transaction multiple times resulting in many returned payment fees.

Join a Free Returned Item Fee Class Action Lawsuit Investigation

If you were charged multiple returned item fees (also known as NSF fees or insufficient funds fees) on the same transaction by your bank, you may be entitled to compensation.

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