Credit Union Overdraft Fees Lawsuit | 2025 Latest Updates

Credit Union Overdraft Fees Lawsuit Overview

Legal action has emerged against major banks and credit unions for deceptive overdraft practices that result in excessive fees charged to consumers.

The primary allegations focus on banks processing transactions out of order to maximize overdraft fees, charging multiple fees for single transactions, and failing to disclose fee structures properly.

Major financial institutions including Wells Fargo, Bank of America, and JPMorgan Chase have faced lawsuits resulting in settlements totaling hundreds of millions of dollars.

Overdraft fees lawsuit claims center on violations of state consumer protection laws and unfair banking practices that cause financial harm to account holders.

What is an Overdraft Fee?

Fees are charged by banks and credit unions to move money to a bank account balance when a bank customer is overdrawn.

This money may come from a linked checking account or loan provided by the financial institution. Overdraft fees are also known as a non-sufficient funds (NSF) fee or courtesy pay fees.

Related Article: Bank Overdraft Fees Lawsuit

What is the Overdraft Protection Law?

Rules regarding overdrafts changed in 2010. Before the Overdraft Protection Law passed, most financial institutions automatically enrolled customers’ bank accounts in overdraft coverage.

Then in July 2010, the Federal Reserve enacted the Overdraft Protection Law, which prohibited banks and credit unions automatically enrolling customers and instead requiring banks to inform customers they have to opt in or opt out at any time for overdraft services.

This law only applies to a debit card transaction that is not pre-authorized, such as ATM withdrawals and transactions.

Pre-authorized withdrawals, such as automatic bill payment and checks, do not fall under the umbrella of the law and still can still lead to a single transaction overdraft fee.

What is a Credit Union?

Credit unions are member-owned non-profit organizations that function much like a bank. These businesses accept deposits, make loans, and provide other financial services.

Profits are returned to members in the form of reduced fees, higher savings, and lower loan rates.

Latest Overdraft Fees Lawsuit Updates

• 2017 – Bank of America agreed to pay $66.6 million to compensate nearly 6 million customers who were charged excessive extended overdraft fees. The settlement addressed unlawful interest rates charged to customer accounts that remained overdrawn for several days [1].
• 2014 – Federal judge ordered Wells Fargo to pay $203 million to settle class action allegations for wrongfully processing transactions to charge excessive fees. The court found this practice violated California state law and constituted deceptive banking practices [2].
• 2012 – JPMorgan Chase agreed to pay $110 million to settle lawsuit regarding excessive overdraft fees. The lawsuit alleged JPMorgan engaged in “unfair, deceptive, and unconscionable” collection of extended overdraft fees from checking accounts [3].
• 2010 – Federal Reserve enacted Overdraft Protection Law prohibiting banks from automatically enrolling customers in overdraft programs, requiring explicit opt-in consent for overdraft services on debit card transactions and ATM withdrawals [4].

Banking Regulatory Reports and Statistics

The Consumer Financial Protection Bureau has documented widespread overdraft fee abuse across the banking industry, with financial institutions collecting billions in overdraft revenue annually.

Banks typically charge overdraft fees ranging from $25-$38 per transaction, with some institutions allowing multiple fees per day.

Recent regulatory analysis shows that overdraft fees disproportionately affect low-income consumers, with frequent overdraft users paying hundreds of dollars annually in fees.

The 2010 Overdraft Protection Law applies only to debit card transactions and ATM withdrawals, leaving automatic bill payments and checks subject to overdraft without explicit consent.

Studies indicate that banks often process transactions in order from highest to lowest amount to maximize the number of overdraft fees charged, rather than processing in chronological order or smallest to largest amounts.

Overdraft Fees Financial Harm & Consequences

Excessive overdraft fees create significant financial burdens for consumers, particularly those with limited resources who are most vulnerable to banking account fluctuations.

• Multiple Fee Charges: Banks charging several overdraft fees for single transactions or processing multiple small transactions to generate maximum fees.
• Transaction Reordering: Financial institutions processing transactions from highest to lowest amounts to increase the number of overdraft fees rather than chronological processing.
• Extended Overdraft Fees: Additional daily or weekly fees charged when accounts remain overdrawn beyond initial overdraft periods.
• Insufficient Fund Penalties: Non-sufficient funds (NSF) fees charged even when sufficient funds are available or when automatic overdraft protection should prevent overdrafts.

Do You Qualify for an Overdraft Fees Lawsuit?

You may qualify for an overdraft fees lawsuit if:

• You maintained a checking account with a bank or credit union between 2010 and present
• You were charged excessive overdraft fees, multiple fees for single transactions, or extended overdraft penalties
• The fees caused significant financial hardship or were charged despite available funds
• You can provide account statements and documentation of improper fee charges
• Your bank processed transactions in order to maximize overdraft fees rather than chronological order

Evidence Required for an Credit Union Overdraft Fees Lawsuit

• Account Documentation: Bank statements showing overdraft fees, transaction histories, and account terms and conditions.
• Fee Records: Documentation of specific overdraft charges, dates of transactions, and fee amounts charged by the financial institution.
• Communication Records: Correspondence with the bank regarding disputed charges, fee explanations, and account policies.
• Financial Impact Evidence: Records showing financial hardship, additional costs incurred, and economic damages from excessive fees.

Damages You Can Recover

• Fee Refunds: Recovery of excessive overdraft fees, NSF charges, and extended overdraft penalties wrongfully collected.
• Interest and Penalties: Compensation for interest charges and additional costs resulting from improper fee practices.
• Legal Costs: Recovery of attorney fees and litigation expenses in successful cases.
• Punitive Damages: Additional compensation to punish banks for deceptive and unfair overdraft practices.

Overdraft Protection Law Information

• Effective Date: July 2010
• Regulatory Agency: Federal Reserve
• Coverage: Debit card transactions and ATM withdrawals requiring explicit customer opt-in for overdraft coverage
• Exclusions: Automatic bill payments, checks, and pre-authorized transactions not covered by opt-in requirements
• Requirements: Banks must inform customers about overdraft programs and allow opt-out at any time
• Prohibited Practices: Automatic enrollment in overdraft programs without customer consent

Statute of Limitations for Overdraft Fees Lawsuits

The statute of limitations for banking and consumer protection lawsuits varies by state and type of claim, typically ranging from 2-6 years from the date fees were charged or discovered.

• Most States: 3-4 years from date of improper fee charges
• Consumer Protection Claims: May have different limitation periods based on state laws
• Contract Claims: Typically 4-6 years for breach of banking agreement claims
• Class Action Cases: May have extended deadlines for joining existing litigation

Given the complexity of banking regulations and varying state laws, consultation with legal counsel is essential to determine specific filing deadlines for overdraft fee claims.

FAQs

1. What makes overdraft fees illegal or excessive?

Overdraft fees become improper when banks process transactions out of order to maximize fees, charge multiple fees for single transactions, fail to disclose fee structures, or charge fees despite sufficient funds being available in customer accounts.

2. How much have banks paid in overdraft fee settlements?

Major settlements include Wells Fargo paying $203 million in 2014, JPMorgan Chase paying $110 million in 2012, and Bank of America paying $66.6 million in 2017 to resolve overdraft fee litigation.

3. Do I need to opt into overdraft protection to be charged fees?

Since 2010, banks must obtain explicit customer consent before charging overdraft fees on debit card transactions and ATM withdrawals. However, automatic bill payments and checks can still result in overdraft fees without opt-in consent.

4. Can I recover overdraft fees even if I was technically overdrawn?

Yes, you may recover fees if the bank processed transactions improperly to maximize fees, charged multiple fees for single transactions, or violated banking regulations regardless of account balance.

5. Does My Checking Account Automatically Have Overdraft Protection?

No. Banks are prohibited from charging overdraft fees unless the customer has “opted-in” to the overdraft program.

6. How do I prove my bank charged improper overdraft fees?

Account statements, transaction histories, and banking policies can establish improper fee practices. Expert analysis of transaction processing order and fee structures helps demonstrate wrongful bank conduct.

7. Are credit unions also subject to overdraft fee lawsuits?

Yes, credit unions must also comply with overdraft protection laws and can face lawsuits for excessive or improperly charged overdraft fees similar to traditional banks.

8. Should I file an individual lawsuit or join a class action?

Our attorneys handle individual litigation rather than class actions to maximize compensation for clients. Individual cases often result in better outcomes than class action settlements for overdraft fee claims.

9. How long do overdraft fee lawsuits typically take?

Cases typically take 1-2 years to resolve, depending on the complexity of fee issues and bank cooperation. Some cases may settle earlier while others requiring extensive financial analysis may take longer.

10. What should I do if my bank continues charging improper fees?

Document all improper fees, contact the bank in writing to dispute charges, and consult with our attorneys about legal action to stop ongoing improper fee practices and recover damages.

Get a Free Credit Union Overdraft Fees Lawsuit Evaluation With Our Lawyers

Time is limited to pursue legal action for improper overdraft fees. Most states allow only 3-4 years from the date fees were charged to file banking violation lawsuits.

At Schmidt & Clark, we provide:

• Free, confidential consultations to evaluate your case
• No upfront costs or fees for legal representation
• Payment only if we win your case through settlement or trial verdict
• Experienced legal team with banking litigation experience

Our attorneys have successfully recovered millions of dollars in improper bank fees for thousands of consumers nationwide. We understand the complex banking regulations and fee structures that banks use to maximize revenue at customer expense.

Contact us today for your free case evaluation. Do not delay – legal deadlines are strict and evidence preservation is critical for building a strong case.

References

1. https://www.reuters.com/article/business/bank-of-america-settles-overdraft-lawsuit-for-666-million-idUSKBN1D22EQ/
2. https://www.lawyersandsettlements.com/settlements/17336/wells-fargo-203m-overdraft-fees-class-action.html
3. https://www.bloomberg.com/news/articles/2012-02-06/jpmorgan-agrees-to-pay-110-million-to-settle-overdraft-fee-gouging-case
4. https://www.federalreserve.gov/newsevents/pressreleases/other20100222a.htm