Although banks and credit unions are allowed to enable overdraft protection programs, the restrictions and regulations around these have led to some strange practices by financial institutions. Some consumers alleged that credit unions are attempting to rake in higher revenue by reordering transactions and attempting to capitalize on collecting multiple overdraft fees at once. One such credit union under investigation for this behavior is SchoolsFirst.

As consumers have gotten savvier and using tools such as mobile banking, the consumer might be under the impression that the transactions will be processed in the order in which they were made. The credit union, however, my process these transactions out of order, meaning that a consumer whose bank account goes into the red is subject to numerous overdraft fees.

If the largest transaction is processed first, every subsequent transaction, even if it is only for a couple of dollars, can trigger additional overdraft fees. Depending on when the consumer notices the situation, the overdraft fees can go into the hundreds of dollars.  Many different banking institutions have been researched by consumers due to allegations of reordering transactions.

Consumers might not expect that their credit union would go out of the way to order transactions in a way that favors the credit union’s overdraft policies, but SchoolsFirst and other credit unions might be doing just that.

Consumers have to opt into the overdraft program and agree to the overdraft fees set by the credit union in order to allow transactions that would take the account below zero to through anyways. But whether or not it’s okay for a credit union to reorder transactions to get as many overdraft fees as possible is another issue altogether.

According to the SchoolsFirst credit union website, consumers might choose to get overdraft protection to help cover a variety of different transactions. The bank offers a few programs for consumers under the names Overdraft Protection Loan, share transfers, and debit card overdraft protection. The share transfers option allows the credit union member to link another account to their primary one so that money can automatically be moved in from the second account if the first one goes below a zero balance.

The SchoolsFirst website states that overdraft fees on the debit card overdraft program only apply if the account balance is negative by more than $10 and the transaction in question is also over $10.

According to 2016 data, consumers pay around $15 billion in overdraft fees each year to banks, making this a very profitable practice for credit unions and banks. This has led to some consumers wondering if banks are trying to squeeze as many fees as possible for each consumer who has an account balance that drops below zero.

Another study found that as many as half of consumers in the U.S. who got hit with fees for overdrafting don’t remember opting in to start with. It’s a good idea to take a look at all your banks once a year to determine if you have overdraft protection and if you want to continue using it, especially if you bank with SchoolsFirst.

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.

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