The Consumer Financial Protection Bureau (CFPB) has announced a TD Bank overdraft settlement agreement over illegal overdraft practices. The class action settlement will provide restitution to more than a million consumers who paid an overdraft fee to TD Bank.

TD Bank is an American subsidiary of the Canadian Toronto-Dominion Bank, and operates in approximately 1,250 locations in the U.S. with more than 26,000 employees. Like many financial institutions, TD Bank offers an overdraft protection service that prevents a customer’s account from dropping below zero—instead, the bank covers the shortfall for an overdrawn transaction so that it still goes through and then charges an overdraft fee. Today, most overdraft fees are between $30 and $35.

An investigation by the CFPB found that TD Bank’s overdraft enrollment practices violate several laws, including the Electronic Fund Transfer Act (EFTA) and Regulation E. According to the CFPB investigation, TD Bank regularly charged consumers overdraft fees on ATM and one-time debit transactions without getting their prior express consent.

The Bureau also found that TD Bank engaged in “deceptive and abusive acts or practices in violation of the Consumer Financial Protection Act of 2010 (CFPA).” Moreover, TD Bank also engaged in practices that the Fair Credit Reporting Act (FCRA) prohibits, the CFPB found.

Now, the TD Bank overdraft settlement requires that the bank provide approximately $97 million in restitution to about 1.42 million consumers. As part of the terms of the TD Bank overdraft settlement, the financial institution will also be required to pay a civil money penalty of $25 million. On top of these financial penalties, the class action settlement also requires that TD Bank correct its overdraft protection enrollment practices to comply with the law.

The overdraft protection service in question is TD Bank’s Debit Card Advance (DCA) service. The CFPB found that TD Bank would tell new customers that DCA was “free,” and “comes with” new consumer-checking accounts. While signing up for overdraft protection is free, use of the service involves $35 overdraft fees for overdrawn transactions through DCA. On top of that, DCA does not “come with” checking accounts—instead, as required by law, it is optional and must be opted into.

Using these obfuscation tactics, the CFPB found, TD Bank enrolled consumers into DCA even when the consumers did not have a complete understanding of DCA’s terms and conditions.

The CFPB found other instances of abusive acts or practices regarding DCA. For instance, TD Bank allegedly required new customers to sign an overdraft notice without mentioning the DCA service at all, but with the “enrolled” option already checked, and also obscured overdraft notices to prevent customers from reviewing their pre-marked enrollment status in DCA, among other violations.

Overdraft fees are a huge source of profit for major banks in the U.S., with consumers paying $15 billion in overdraft fees and bounced check charges in 2016 alone, according to Credit Karma.

One issue with overdraft fees is how quickly they can add up, with each subsequent overdrawn transaction incurring another fee. This is exacerbated if banks engage in a process called reordering, in which they deliberately reorder transactions from highest to lowest rather than the order in which they were placed, thereby incurring the highest number of overdraft fees possible.

Filing an Overdraft Fee Class Action Lawsuit

A number of major banks and credit unions have faced class action litigation over unfair, deceptive, or predatory overdraft fee practices. In some cases, these lawsuits have ended in a substantial class action settlement, like this recent TD Bank overdraft settlement agreement.

If you have faced unfair overdraft practices at TD Bank or another financial institution, 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.

Join a Free Bank Overdraft Fee Class Action Lawsuit Investigation

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. Learn more by filling out the form on this page.

Learn More

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