Axos Bank faces a proposed class action over its alleged practice of deceptively charging overdraft fees for transactions that do not actually overdraw an account.
Per the 31-page case, Axos fails to disclose to customers that each time it reprocesses a transaction—such as a check, ACH or debit transaction—for payment, it considers the transaction a “new item” subject to overdraft fees. Thus, a transaction that is initially authorized by the bank could nevertheless incur a $25 overdraft fee if it settles into a negative balance days later, the suit says. The lawsuit alleges customers would not reasonably expect that certain transactions could incur overdraft fees given Axos’s account contract “never even hints that this counterintuitive result could be possible.”
According to the suit, Axos’s “abusive” overdraft fee practice disproportionately affects the bank’s “most vulnerable customers,” including younger, lower-income and non-white accountholders, and serves to maximize the bank’s fee income.
The transactions at issue in the lawsuit are described in the complaint as “authorize positive—purportedly settle negative” (APPSN) transactions. These transactions, the suit says, are initially authorized by Axos, who sets the funds aside and reduces a customer’s available balance by the amount of the transaction. Thus, the customer’s account should always have sufficient funds to cover the transaction, the lawsuit argues.
Axos, however, often charges overdraft fees on such transactions when a subsequent transaction reduces the amount in the customer’s account, and the initial transaction then settles into a negative balance days after it is executed, the case claims. Per the lawsuit, although Axos places a debit hold on the funds set aside for the initial transaction and keeps these funds off-limits for the customer’s purposes, the bank improperly charges overdraft fees for these transactions when it reprocesses them days later. This occurs during Axos’s nightly “secret batching posting process,” when the bank releases the held funds “for a split second” and then re-debits the transaction a second time, which subjects it to overdraft fees, the case relays.
According to the suit, this “secret step” allows Axos to charge customers overdraft fees on transactions “that never should have been subject to them” given the bank had already set aside money to cover them. The lawsuit argues that there is a “huge gap” between how Axos describes its overdraft policies in its account documents and its actual practices. Accordingly, customers never expect the bank to charge overdraft fees in such an “unreasonable way,” the suit alleges.
“Nowhere does Axos disclose that it will treat each reprocessing of a check or ACH payment as a separate item, subject to additional fees, nor do Axos customers ever agree to such fees,” the complaint scathes.
The lawsuit looks to represent Axos checking account holders who, during the applicable statute of limitations, were charged overdraft fees on transactions that were authorized into a positive available balance, or were charged two or more fees on the same item.
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