First Savings Bank Charged Overdraft Fees on Accounts with Positive Balances, Class Action Says

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First Savings Bank (FSB) faces a proposed class action lawsuit over allegations it levied improper overdraft fees that have left accountholders in “an increasingly devastating cycle of bank fees.”

According to the case, FSB’s contracts with customers specifically promise that the bank will only charge overdraft fees on transactions that overdraw an account and result in a negative balance. Despite the bank’s guarantee that only a negative balance can trigger an overdraft charge, FSB, the complaint claims, levied these charges on accounts that had sufficient funds to cover their transactions.

With regard to the plaintiff, the case claims the woman, who is the owner and sole proprietor of a small business, was charged a $35 overdraft fee by FSB for a transaction made on September 16, 2019. According to a monthly statement given to her by FSB, however, the plaintiff’s account always contained sufficient funds to cover the charge, the lawsuit says, and the balance of the account was not negative when she was charged the fee.

The case alleges that the reason for the apparent discrepancy between the defendant’s terms and its fee collection practices is that FSB has misrepresented the nature of its overdraft fees to consumers. Specifically, the lawsuit contends FSB does not charge overdraft fees based on the actual amount of money in a given account, but rather on a “manufactured balance” undisclosed in monthly statements.

“By using this calculation—as opposed to the actual money in an accountholder’s account—to determine whether to assess an [overdraft] fee, FSB increased the number of [overdraft] fees it assesses on its accountholders,” the suit claims.

The complaint claims that typical consumers would interpret FSB’s use of the term “balance” in its contracts as referring to the official balance of the account. Consumers, the lawsuit continues, could not reasonably expect that the bank would assess overdraft fees based on a manufactured balance. By giving consumers a misleading description of its fees, the lawsuit argues, FSB violated the Electronic Funds Transfers Act and New Mexico’s Unfair Practices Act.

The lawsuit looks to represent a class comprising “[a]ll FSB checking account holders in the United States who, during the applicable statute of limitations, were charged [overdraft] Fees on transactions that did not overdraw their checking accounts,” and a class of similarly situated New Mexico residents. The suit requests that FSB be required to restore all overdraft fees it collected from class members on transactions that did not overdraw their respective accounts.