Overdraft Fee Lawsuit
Overdraft Fees Illegal?
Are overdraft fees illegal? This depends on the bank or credit union’s procedures and policies. The overdraft protection law was created by the Federal Reserve in 2010. It says that a bank or credit union must get a customer’s approval to use overdraft protection. If the customer does not opt-in to overdraft protection, then banks and credit unions can’t charge them overdraft fees. So, if a bank charges you for an overdraft and you never opted into overdraft protection, then those overdraft fees are illegal. Now, this only applies to transactions that are not pre-authorized, like ATM withdrawals or debit card transactions. Banks can charge you for overdrafts on pre-authorized charges, like automatic scheduled payments, without getting your consent.
There are also other ways overdraft fees can be illegal. Even if you have opted in to overdraft protection, the bank may engage in deceptive practices to allow them to charge you for multiple overdrafts or for overdrafts even when you have enough money in your account. Keep reading to find out more about these deceptive overdraft practices and what you can do about it.
Overdraft Fee Definition
An overdraft fee is a fee your bank or credit union charges you when you make a purchase or withdraw money from your account in an amount that is greater than the money you actually have in your account. When you create that transaction, your bank might go ahead and process the payment. If so, they are basically loaning you the amount of money that you overdrafted. Then they usually charge you a fee or penalty, known as an overdraft fee. They will also charge you interest on the loan extended until you add enough money into your account to cover the loan and fees. Sometimes, the bank handles your overdraft transaction by transferring money in you have in another linked account, rather than extending you a loan. In this case, the bank will still probably charge you and overdraft fee.
Overdraft fees are similar to non-sufficient funds fees (NSF Fees), also known as insufficient funds fees. In both cases you have created a transaction for more money than you have in your account. The bank can either extend you overdraft protection and pay the transaction or it can deny the transaction and charge you an NSF Fee. Even if the bank or credit union denies the transaction, they still might charge you an NSF Fee. Whether or not they’re allowed to charge that fee depends on the policies you agreed to when you opened your account.
Overdraft Protection Law
The overdraft protection law was enacted in 2010 by the Federal Reserve in its rulemaking and regulatory capacity. The law is 12 C.F.R. § 1005.17, Regulation E. The law allows banks and credit unions to charge overdraft fees on ATM and one-time debit card transactions only if the customer has first given written consent to having overdraft fees charge. The rule does not apply to check transactions or recurring debit transactions, for example transactions like monthly automatic bill payments. For those transactions, the bank does not require your written consent to charge you for an overdraft.
Overdraft Fee Lawsuit
Although banks and credit unions do have the legal right to charge overdraft fees, they cannot just charge the fees in any way they choose. In fact, there are a variety of ways that banks charge overdraft fees and other bank fees that are illegal. When banks charge you illegal fees, you can file an overdraft fee lawsuit to get compensation and hold them accountable.
It’s well known in the financial industry that banks and credit unions make huge amounts of money by charging their customers improper fees. These deceptive practices are especially hurtful to low-income and other at-risk individuals whose precarious financial situation can be further destroyed by improper fees.
Here are some examples of ways that many banks and credit unions charge improper and unlawful fees. When this happens, we can bring an overdraft fee lawsuit or class action lawsuit to get you compensation.
- Banks often charge overdraft fees and NSF fees even when you have enough money in your account to pay the transaction. It’s hard to believe, but we have found banks doing this frequently.
- Banks often reorder your transactions to maximize the amount of fees they can charge you. For instance, instead of processing your debits and credits in the order in which you made them, the bank might wait until the end of the day and then process your transactions starting with the largest debit first. If the largest debit takes your account into a negative balance, then any other smaller transactions will result in overdraft fees. If the bank had processed the debits in the order you made them, there would likely have been fewer transactions on a negative balance and thus fewer overdraft fees.
- Banks might charge you extended overdraft fees if you have an overdraft fee charged and a negative balance on your account for a certain period of time, often 7 days.
- Banks often charge ATM balance inquiry fees improperly. These are fees they charge when you do a balance inquiry at an ATM. These fees can be improper in several ways. For example, if they charge you two fees, one for a balance inquiry and the other for withdrawing the money that may be improper. Or it may be improper for them to charge you for a balance inquiry you make at the ATM of a different financial institution.
- Multiple NSF fees happen when a bank tries to process one of your transactions multiple times and charges you an NSF fee every time it denies the transaction for lack of funds.
- There may be other bank fees that your bank charges you improperly. Your contract with the bank or credit union should be clear on what fees they can charge and in what way.
NSF fees, also called non-sufficient funds fees, insufficient funds fees, or returned item fees can be a source of deceptive fees for banks and credit unions. Check out our page on NSF fees for more information.
What are your Options?
If you think your bank or credit union has charged you improper or deceptive fees you can try calling them up and getting them to waive the fee. If they were clearly in the wrong and you have been a good customer, they might be willing to waive a fee or two. However, the banks often will tell you they are charging the fees correctly. If so, get in contact with us so we can review your claim. We have the experience and the results to get you compensation for wrongful bank fees and to hold the banks accountable for their practices.
Overdraft fee Class action lawsuit
Depending on the facts of your case, we may recommend filing an overdraft fees class action lawsuit against the bank or credit union. This is usually the best way to get their attention, get you fair compensation, and get them to stop their deceptive overdraft fee practices.
Bank of America overdraft fees class action lawsuit
Bank of America recently agreed to settle an overdraft fees class action lawsuit for $75 million. The case was filed in North Carolina. The plaintiffs alleged that BOA charged multiple NSF and overdraft fees on the same transactions. The plaintiffs also alleged that BOA charged other improper fees, for instance on transfers between BOA accounts and by deducting fees in checking accounts too soon.
Another recent case against Bank of America in New York alleges that BOA charges deceptive transfer fees when customers transfer money to other, non-BOA accounts. The plaintiffs say that if they initiated the transactions from their other banks, they would not be charged transfer fees.
How to Get Started on stopping Illegal Overdraft Fees
If you think your bank or credit union may be charging your improper fees of any kind, then we welcome the opportunity to review your case. We offer a free consultation to investigate your claim and recommend what you can do. The best way to reach us about bank fee claims is to fill out our contact form. Attorney Eric Kem will personally review the information you submit and contact you to discuss your claim.
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