Dollar Bank Charges Unlawful Overdraft Fees, Class Action Claims
by Erin Shaak
The Columbian Spot, LLC v. Dollar Bank
Filed: September 1, 2021 ◆§ 2:21-cv-01171
Dollar Bank faces a proposed class action over its alleged practice of charging overdraft fees on transactions that do not actually overdraw an account.
Pennsylvania
Dollar Bank faces a proposed class action over its alleged practice of charging overdraft fees on transactions that do not actually overdraw an account.
According to the lawsuit, Dollar Bank has breached the terms of its customer account agreements by representing that it will only charge overdraft fees on transactions for which an account contains insufficient funds. In practice, the bank does the opposite, hitting customers with $36 overdraft fees despite the fact that an account contains enough to cover a particular debit transaction at the time it is made, the case alleges.
The suit claims there is a “huge gap” between Dollar Bank’s representations of its overdraft policy and how the bank actually charges fees, and customers have been “bilked” out of millions of dollars as a result, according to the lawsuit.
“This discrepancy between Dollar Bank’s actual practice and the contract causes accountholders like the Plaintiff to incur more OD Fees than they should,” the complaint contests.
At issue in the lawsuit are what the complaint describes as “Authorize Positive, Purportedly Settle Negative” (APPSN) transactions. Per the suit, these transactions occur when Dollar Bank initially authorizes a transaction for which an account contains sufficient funds but then charges an overdraft fee days later when the account settles into a negative balance. The lawsuit alleges that because Dollar Bank sequesters the funds for the initial transaction at the time it is executed by the customer, thus making the funds unavailable for other uses, there should always be sufficient funds to cover the transactions when they settle days later. Nevertheless, if an intervening transaction depletes the customer’s account between when they executed a prior transaction and when that transaction settles, Dollar Bank will assess an overdraft fee on the initial transaction, the case relays.
According to the suit, this practice runs contrary to Dollar Bank’s representations in its account documents that purport to describe the bank’s overdraft practices:
“In plain, clear, and simple language, the checking account contract documents covering OD Fees promise that Dollar Bank will only charge OD Fees on transactions that have insufficient funds to ‘cover’ that debit card transaction. In short, Dollar Bank is not authorized by contract to charge OD Fees on transactions that have not overdrawn an account, but it has done so and continues to do so.”
Per the case, Dollar Bank’s practice of charging overdraft fees on APPSN transactions is rooted in the bank’s overnight “secret batching posting process,” during which the defendant releases the holds on the funds it has sequestered “for a split second” and then re-debits the transactions for a second time. Though these transactions initially did not trigger overdraft fees, Dollar Bank assesses fees when re-debiting the transactions from customers’ accounts after their funds had been reduced due to intervening transactions, the suit says.
According to the case, this “secret step” allows Dollar Bank to assess overdraft fees on transactions that never should have overdrawn a customer’s account given they that were initially authorized and Dollar Bank had already set aside funds to pay them.
“This discrepancy between Dollar Bank’s actual practices and the contract causes accountholders to incur more OD Fees than they should,” the complaint argues, alleging there is “no justification” for Dollar Bank’s practices other than to maximize fee revenue.
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