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Consumer Fraud

Is Your Bank Charging Unfair or Deceptive Overdraft Fees?

This Alert Affects:

Consumers who have been charged overdraft fees from their state or regional bank to cover debit card purchases or checks written when there were insufficient funds in their accounts.

Overdraft fees are incurred on each purchase made, so they can add up quickly and leave customers with a large debt to repay. Complaints have also alleged that banks manipulate the order of a customer's transactions in order to make them incur the maximum number of overdraft fees, thereby further increasing the bank's profits.
Additional Details
Many banks automatically enroll customers in overdraft protection plans, so customers may be unaware of the consequences of making a purchase when there are insufficient funds in their accounts. In addition, the overdraft fees may be disproportionate to the amount of the purchase. For example, a $4.00 purchase may incur a $35.00 overdraft fee.
In 2009, complaints have been filed against several banks regarding their overdraft protection policies.

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. As these lawsuits progress and begin to resolve, our site is looking to determine whether smaller state and regional banks are also engaging in these practices.

Lawsuits for Unfair Overdrafts

The peace of mind and convenience provided by overdraft protection plans comes at a heavy price.

According to complaints filed against Bank of America, Citibank, Wells Fargo, Chase, and others regarding unfair overdraft charges, the peace of mind and convenience provided by overdraft protection plans comes at a heavy price. These complaints allege that banks 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 online regarding unfair overdraft fees, 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.

Unfair Overdraft Charges?

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.

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