Class Action Bank Overdraft Fee Lawsuits
Sixty-eight percent of American households had a bank account (checking or savings account) in 2015 according to a study conducted by the Federal Deposit Insurance Corporation (FDIC)—the governmental corporation responsible for insuring deposits and examining and supervising financial institutions among other tasks.
Banks and credit unions offer a variety of checking account products to their customers. In addition to the basic checking account, customers can add online banking, bill payment, debit cards and overdraft protection services depending on the financial institution. With so many ways to spend and deposit money, it’s no surprise that many consumers wind up with bank accounts in a negative balance or overdraft situation. Banks earn revenue from overdraft account fees. This income often serves as an incentive for banks to engage in deceptive practices.
‘Extended’ Overdraft Fees
Some financial institutions charge multiple fees to consumers with checking accounts. One example is an ‘extended’ overdraft fee. These are fees the bank charges customers with negative account balances. These charges are assessed several days after the account has been overdrawn—usually between 7 to 10 days. Lawsuits have been filed against banks and credit unions that charge these fees and allege these additional fees amount to an interest charge. There are limits to how much a company can charge in interest and many of these fees exceed these limits.
Bank of America settled a class action lawsuit for $66 million for charging a $35 fee when an account is first overdrawn and another $35 when the account remained overdrawn for five days.
Reordering of debits and credits
Lawsuits have been filed against financial institutions for posting debits and credits to consumer accounts in a way to maximize overdraft fees. Here’s an example: A consumer has $500 in their checking account. They have 4 debits for $150, $200, $400, and $250. Instead of posting the debits in the order they are received, the bank posts the largest one first, thus creating an overdraft situation upon posting the next transaction. Had the bank posted the transactions in the order they were received the first two items would have cleared. By reordering the debits the bank is able to collect an additional overdraft fee.
Bank of America settled a class action lawsuit for $410 million for reordering customer transactions and charging overdraft fees. TD Bank paid over $62 million in a class action settlement for the same thing in 2010.
If you or someone you know has been charged fees by a bank on a checking account, contact us. Our class action attorneys would like to gather additional information about your transactions.