A number of financial institutions, including Valley National Bank, are currently under investigation for allegedly implementing improper bank overdraft fee practices.

According to its website, Valley National Bank was founded in 1927 and now has more than 200 locations across New York, New Jersey, Florida, and Alabama. Valley National Bank does not display its overdraft fee policy in a prominent place on their website. Instead, the bank asks consumers to enter their ZIP code to see a list of fees for services in their area. Within the New Jersey ZIP code 07055, they list the overdraft fee as a $36 charge per item, as well as a $15 fee per day that the account remains in overdraft past five consecutive business days.

What Is an Overdraft Fee?

It is common for banks and credit unions to offer overdraft protection programs to their customers, which are purportedly meant to allow them to make purchases even when they overdraw their account (that is, take out more money than is actually available). Under an overdraft protection plan, customers are able to complete the transaction in exchange for an overdraft fee, which is typically around $35. Their account will then be charged for the transaction when the money is available.

One important thing to note about how overdraft fees work is that they compound. Each transaction made that further overdraws your account will incur its own, separate overdraft fee, which can add up quickly, according to NerdWallet. Each year, banks and credit unions make billions off of overdraft fees alone.

How To Avoid Unnecessary Overdraft Fees

Overdraft fees can cause significant financial strain on consumers. Multiple fees can quickly add up to over $100 on a single transaction. Luckily, NerdWallet lists several ways to avoid overdraft fees, including the following tips:

• Opt out of overdraft protection: Banks can only charge overdraft fees to consumers who have opted into an overdraft protection program. Opting out of one of these programs will mean that consumers will not be charged overdraft fees. However, this could open up consumers to other fees such as NSF fees – leading some customers to keep their overdraft protection as a safety net.
• Keep an eye on account balances: Mobile banking is offered by virtually every bank or credit union, meaning that it is easier than ever for consumers to check their account balances on the go. Being mindful of available funds can help consumers avoid unnecessary purchases which would overdraw their account.
• Set up low balance alerts: In addition to checking their account balances regularly, bank customers may have the option to set up low balance alerts for their accounts. This will send a text, email, or other alert to the customer when their account falls below a set dollar amount. When consumers receive these alerts, they can be cautious and do their best to avoid overdraft fees through overspending.

Although these tips can be helpful in avoiding excessive fees, improper overdraft fee practices may result in numerous fees despite consumers being careful and responsible with their money.

Deceptive Overdraft Fee Practices

Overdraft fees themselves can be expensive, especially when they compound, but some banks and credit unions may be taking advantage of their customers using these overdraft protection programs by employing deceptive or unfair practices.

For instance, a financial institution may attempt to charge their customers as many overdraft fees as possible by reordering transactions from highest to lowest order. When the largest transaction is processed first, followed by the next largest transactions in descending order rather than in the order in which they were made, each subsequent transaction is more and more likely to incur an overdraft fee. This means the customer’s account will slip into overdraft as quickly as possible, which in turn creates the largest pile of overdraft fees possible. A number of banks have been sued over this practice.

In other cases, customers may find themselves facing unexpected overdraft fees when their online bank account reflects a different balance than is actually available, due to some lag time between when a purchase is made and when the charge hits the account.

The number of overdraft fees being charged is declining as more and more people have easy access to their account information. However, this does not mean that banks are making less from overdraft fees. They may be turning to misleading strategies to make up the difference, though the nature of online banking itself does still play a role in customers being hit unexpectedly with overdraft fees. Some customers who think that they do have reliable information may run into fees nonetheless.

Like overdraft protection itself, online banking is another element that banks often advertise as a convenience to customers. In fact, some customers may even choose their bank or credit union based on the convenience and reliability of their online banking platforms.

Banks often advertise online banking as a way for customers to have immediate access to information about their banking. However, Forbes explains that though the demand for online banking has skyrocketed in recent years, the technology behind the service has not quite caught up. These technical issues can lead to customers relying on outdated or incorrect information to make purchasing decisions.

If a customer with a low balance relies on their online banking information to decide whether or not they have enough money in an account to make a purchase, they might think that they have more money in their account than they do, because their most recent purchases might not have processed yet. If this happens, this customer may unknowingly overdraft their account and unknowingly incur an overdraft fee. 

Filing an Overdraft Fee Lawsuit

A slew of banks and credit unions have already been hit with litigation over unfair or improper overdraft fee practices. If you have been hit with the overdraft practices listed above or other unfair practices by your bank, you may be able to file a lawsuit and pursue compensation.

Filing a lawsuit can be a daunting prospect, 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.