Unfair Overdraft Protection Fees

A recent series of lawsuits against the giants of the banking industry allege that consumers are being victimized by unfair and deceptive practices regarding overdraft protection fees. 

Many banks automatically enroll their customers in overdraft protection plans, touting them as providing peace of mind and convenience.  In theory, these plans protect consumers by providing that the bank will not refuse a check or debit card transaction for insufficient funds.  This service can save consumers from embarrassment, inconvenience, and in some instances, even criminal prosecution.  Of course, these plans are not free – typically the bank will charge a customer around $35 or so per transaction.

According to complaints filed against Bank of America, Citibank, Wells Fargo, Chase, and others, the peace of mind and convenience provided by overdraft protection plans comes at a heavy price.  These complaints allege that banks have purposively set out to maximize the amount they can charge their customers in overdraft fees.  For example, the complaints allege that rather than reject repeated debit card transactions at the point of sale, banks intentionally allow customers to continue using their debit cards even though they have a negative balance.  According to consumer complaints on line, this results in seemingly minor transgressions ballooning into a financial catastrophe, like a $25 stop at a fast food restaurant followed by a tank of gas and a few dollars at the convenience store resulting in almost $100 in overdraft fees.  Other consumers say one mistake has caused an entire weekends’ worth of spending to come with a $35 or more per transaction add-on by the bank.

The complaints also allege that banks will “re-order” a customer’s transactions so as to inflate the amount owed in overdraft protection fees.  This means that if a series of debits comes into the bank on a particular day, the bank will process the largest debit first no matter when it occurred that day.  So, take a customer with a $100 balance who makes four $25 debit card purchases in the morning and then a $50 purchase at night.  Rather than charge only one overdraft fee for the $50 evening transaction, the bank will debit the $50 transaction first and charge overdraft fees twice for two of the $25 morning transactions.

Some banks have announced changes to their overdraft protection policies in response to the recent lawsuits filed against them. However, many other banks are continuing with this practice and have no plans on stopping any time soon. If you believe you have been the victim of one of these practices by your bank, we would like to hear about your experience. You may be eligible to participate in litigation against your bank and recover compensation. Please complete our free case review form with your information and you will be contacted by one of our legal representatives as soon as possible.

For more information, please review the following articles:

• Overspending on Debit Cards Is a Boon for Banks
• Big banks to lighten overdraft rules

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