South Carolina-based South State Bank opened in 1934. The bank has 168 branches and serves customers in North Carolina, South Carolina, Georgia, and Virginia. However, according to consumer reports and attorney investigations, the bank may be assessing unethical and predatory overdraft fees against its customers.

According to South State Bank’s overdraft fee policy, the bank pays for overdrafts at their discretion. This means that while the bank may sometimes authorize and pay for transactions for which customers do not have the appropriate funds, it may also decline these transactions. When South State Bank does cover the transactions, these purchases will be subject to a $36 non-sufficient funds fee.

While assessing overdraft and non-sufficient funds fees is not inherently a predatory practice, many consumers claim that South State Bank and other financial institutions purposefully re-order purchases and transactions in order to claim as many fees as possible.

Predatory Overdraft Fee Practices and Policies

While banks and credit unions largely tout their overdraft protection programs as for the consumer’s benefit, covering payments on a customer’s behalf that would have otherwise been rejected due to an insufficient available balance, they may in some cases be more trouble than they’re worth—or may even cause a customer serious financial difficulty.

According to a 2016 study conducted by the Pew Charitable Trusts, more than 40 percent of the financial institutions included in the study rearrange transactions in order to process them from largest to smallest dollar amount, rather than by their chronological order. This may result in multiple overdraft fees being assessed to a consumer due to one purchase. In fact, rearranging transactions in this manner actually maximizes the number of fees that are charged from one purpose, since it guarantees that the account will be pushed into overdraft as soon as possible.

Reordering means that the highest number of transactions will be subsequently processed, each incurring its own fee. This intentional rearranging also makes it difficult for consumers to keep track of when their accounts may overdraft and open them up to fees.

Most banks charge at least $35 per overdraft fee. When transactions are rearranged in order to assess multiple overdraft fees, these fines may add up quickly. Additionally, these fees may disproportionately affect low-income customers.

According to the Pew study, less than 20 percent of account holders pay more than 90 percent of all overdraft fees collected on debit cards, checks, and electronic transactions. To note, consumers who pay more than $100 per year in overdraft fees are generally living off of incomes below the U.S. average.

Available vs Account Balance

In addition to rearranging declined transactions in order to assess multiple fees for the same transaction, consumers have also reported confusion regarding the difference between available balance and account balance. While banks, credit unions, and financial institutions differentiate between these balances, many consumers do not understand the difference.

Account balance means the total balance in the account, while available balance refers to the amount you are able to access. Often, the arranged balance is higher than the account balance due to the amount a customer is able to overdraft being factored in. Therefore, when a customer sees $100 listed in their available balance ledger, they may not realize that if they attempt to make a purchase for the entire amount, they may be assessed an overdraft fee even if the transaction goes through.

Avoiding Overdraft Fees

Customers at South State Bank and other banks and credit unions who have been assessed predatory overdraft fees may be able to hire an attorney and file a class action lawsuit if they can prove that their bank or credit union’s policies regarding overdraft fees were misleading or intentionally confusing.

At one time, most banks and credit unions enrolled their depositors in overdraft protection programs automatically. It was necessary to inform the institution in order to end participation. This changed on July 1st, 2010, when new rules went into effect making these programs opt-in only.

Under these new rules, financial institutions can no longer assess overdraft fees unless the account holder has given consent in writing to participate in such a program. A bank or credit union customer who does participate in an overdraft protection program has the right to opt-out at any time.

If you are not certain whether or not you have opted into such a program, you should contact your institution.

If you are not enrolled in overdraft protection and attempt to make a debit card purchase when the account does not have sufficient funds to cover the transaction, it will simply be declined at the point of sale. If you wish to avoid this scenario without incurring large overdraft fees, consider linking a second account – another checking or savings account – to your primary one. Under this arrangement, your bank or credit union will automatically transfer, or “sweep” funds from the back-up account should your primary one have insufficient funds to cover a transaction. There are fees for this service, but they are usually considerably less than overdraft fees; South State Bank charges $10 per transaction to sweep funds.

It should be noted that banks and other financial institutions are allowed to enroll depositors in overdraft protection automatically for regularly scheduled auto-withdrawals and automatic monthly debit transactions.

Filing an Overdraft Fee Lawsuit

A number of banks and credit unions have been hit with litigation over their overdraft fee practices.

If you are a customer at South State Bank or another bank or credit union that may have hit you with predatory overdraft fees or unfair NSF fees, you may be able to file a lawsuit and pursue compensation. Filing a lawsuit can help compensate you for any losses that may have been incurred, as well as hold financial institutions accountable for their overdraft fee policies.

Filing a lawsuit can be a daunting prospect, especially while dealing with the power of major financial institutions, so Top Class Actions has laid the groundwork for you by connecting you with an experienced attorney. Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

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.