Banks across the country have settled class action lawsuits alleging they charged their customers excessive and fraudulent overdraft fees, paying hundreds of millions of dollars in compensation. Notably, Bank of America settled with its account holders for over 400 million dollars while JP Morgan Chase agreed to pay over 100 million dollars.
Banks record purchases and charges made by their customers’ on debit and check cards in the order in which they were made them. However, instead of crediting the charges in the order they were made, banks often record purchases such that the largest purchase or charge is recorded first and so on. By doing this, customers’ overdraft fees may be increased. Further, some banks reportedly deduct purchases made on a debit card before crediting deposits made on the same day, increasing the likelihood an account holder will incur overdraft fees.
How it works:
Order that You Made Purchases
One Overdraft Fee, charging you $35.00
How the Bank Handled Your Account
Four Overdraft Fees, charging you $140.00
As is clear from the table above, the bank should have only charged one $35.00 overdraft fee, but instead, due to improper “reordering” of the transactions, they instead charged four $35.00 overdraft fees, for a total of $140.00. while this “reordering” of transactions is one way in which banks fraudulently overcharge their customers for overdrafts, it is not the only way.
In addition to “reordering,” it has been alleged that banks throughout the country “hold back transactions,” meaning that banks delay posting transactions made by customers to the customers’ accounts in order to encourage customers to make more transactions, often times with money they are unaware has already been spent. Still further, banks have been accused of deducting debit card purchases from customers’ accounts at the time of swiping as opposed to when the bank pays the merchant. All of these examples can present situations where customers are charged erroneous overdraft fees.
WHAT SHOULD YOU DO?
While proposed federal legislation is aimed to curtail the banking practice of unfairly charging consumers large overdraft fees, such legislation, if enacted, will only protect consumers in the future, and will not refund money the banks have already charged their customers. If you think your bank has charged you invalid or exorbitant overdraft fees, call or email us today to see if we can help.
Whitfield Bryson & Mason LLP
Washington, DC / North Carolina / Kentucky
855.926.2889 / firstname.lastname@example.org