What are Excessive Overdraft Fees?
Bank overdraft fees are withdrawn from a customer's account when a payment or withdrawal exceeds the available balance, and the bank/credit union covers the same transaction as part of an overdraft coverage or overdraft privilege.
The problem is that in addition to covering the initial transaction, the institution also applies an overdraft fee, in some cases up to $30 or more, even when the money overdrawn is just a few dollars. Making matters worse, some financial institutions charge overdraft fees for each day the account balance is not brought up to $0.
What is Overdraft Protection?
Overdraft protection is a service that prevents check, ATM, or debit card purchases to cause a user’s account balance in a financial institution to fall below zero, thereby triggering an overdraft fee or multiple non-sufficient funds fees, according to Investopedia . Bank account holders must opt-in to receive overdraft protection before a bank can provide the service, as required by federal law; however, in 2016 alone, U.S. bank customers still paid approximately $15 billion in multiple fees.
Bank or Credit Union Overdraft Fees Law
U.S. federal law specifies that a bank cannot charge extended overdraft fees on debit purchases or ATM withdrawals unless the consumer agrees. A law that took effect in 2010 forbids banks and credit unions from charging unfair overdraft fees on transactions unless the bank customer agrees to "opt-in" to overdraft protection.
However, charges may still apply when checks or automatic bill payments overdraw an account, even when the customer declines overdraft protection.
There are still no laws regarding how much money bank charged for multiple overdraft fees, meaning customers who opt into the program can still pay unreasonable fees for overdraft transactions.
One tactic that banks are accused of using to increase their profits from overdraft fees is reordering transactions on accounts. That means that regardless of what order transactions occurred in on a single day, some banks process the largest transactions first. That can lead to a lot in extra fees for a person to pay.
For example, say a man spends $10, $20, $50 and $100 (in that order) in 4 transactions on 1 day, having $140 in his account. Either way, the account will likely still go into overdraft. But, if the account is debited in the order the purchases occurred, then only the final transaction will result in an overdraft fee of $35.
However, if the transactions are processed from largest to smallest, then only the $100 purchase will be covered, leaving the customer to pay $35 for each of the final three transactions—for a total of $105 in charges.
Another practice that banks are alleged to have used to push customers into overdraft is authorization holds. Authorization holds occur between the time a bank card purchase is made and the time the merchant settles the transaction. Prior to the merchant settling the transaction, the amount of the purchase is held, but it has not actually been withdrawn from the buyer's account yet.
Once the merchant settles the account, which can occur a few days after the purchase is made, the funds are transferred to the merchant and the customer no longer has the money in his account.
Are Lawsuits Being Filed?
Bank overdraft fees lawsuits have been filed and/or settled in district court against banks including:
- Wells Fargo
- Bank of America
- M&T Bank
- UMB Bank
- And more
Check out our website to find out which finance and insurance lawsuits our lawyers are currently accepting
Overdraft Fee Class Action Settlements
- June 2019 - TD Bank paid $70 million to settle lawsuits for charging excessive fees .
- .April 2019 - Navy Federal Credit Union paid nearly $25 million to settle a lawsuit for charging excessive overdraft fees .
- November 2017 - Bank of America paid $67 million to settle a class action lawsuit accusing it of charging overdraft fees to customers who overdrew their bank accounts.
- May 2013 - California judge ordered Wells Fargo to pay $203 million to settle a class action filed against the bank for illegally processing debit card transactions in order to charge higher bank fees .
Bank overdraft lawsuits allege that banks charge excessive fees when customers overdraw their accounts. Plaintiffs further allege that banks and credit unions use deceptive overdraft practices to force their customers' accounts into overdraft, including misrepresenting account balances and reordering debits and/or credits to accounts.
How Can Overdraft Fees be Avoided?
The good news is that most overdraft fees are avoidable. Use the following tips to manage your accounts and prevent excessive overdraft fees by banks and credit unions:
- Use direct deposit for your paycheck.
- Keep track of your balances and transactions.
- Keep a "pad" or cushion of money available in your checking accounts for unanticipated expenses.
- Link your checking account to a line of credit, savings account, or credit card.
- Find out if your bank will allow you to "opt out" of overdraft protection.
- Ask your bank for a small line of credit that will cover you in the event of an overdraft.
- See if your bank offers automatic notifications.
- Change banks if your bank charges excessive overdraft fees or money for insufficient funds.
Source: American Bankers Association 
What Damages Could I Be Awarded?
If our lawyers determine that you have a legitimate claim against a bank or credit union for charging excessive overdraft fees, you may be eligible to receive compensation for:
- Costs incurred
- Refund of overdraft protection services
- Damages related to consumer protection act violations
- Attorney fees
- And more
Can I File a Class Action?
Although Schmidt & Clark, LLP, is a nationally recognized class action firm, we have decided against class action lawsuits when it comes to bank overdraft fee cases. Our lawyers feel that if there is a successful resolution to these cases, individual suits, not class actions will be the best way to get maximum payouts to our clients.
If you've been charged excessive fees for insufficient funds by a bank or credit union, we want to work with you personally to obtain the maximum compensation possible for your damages. Contact us today to learn more about your legal rights.
Get a Free Bank Overdraft Fees Lawsuit Evaluation With Our Lawyers
The Finance and Insurance Litigation Group at our law firm is an experienced team of trial lawyers that focus on the representation of plaintiffs in Bank overdraft fees lawsuits. We are handling individual litigation nationwide and currently accepting new cases in all 50 states.