It seems once again consumers are getting fleeced as big banks put more
money into their own coffers. In 2015, banks across the U.S. with assets
exceeding $1 billion, reported collecting
$11.6 billion in NSF and overdraft fees. Taking into account
all banks, regardless of size, consumers spend about
$32 billion annually on NSF and overdraft fees. These staggering amounts are routinely
being collected by banking institutions, despite the fact federal regulations
have been put into place governing—to some extent—the circumstances
under which overdraft fees can be charged, and limiting the amounts of
NSF fees charged.
Report Concludes Consumers Need Protection from Banking Institutions
A 2015 report titled “Consumers Need Protection from Excessive Overdraft Costs,” appears to conclude that the banking fees consumers are forced
to pay are not going away anytime in the near future. When you consider
that majority of overdraft fees—which can range from $30-$50—are
incurred for a transaction of $24 or less and that the majority of overdrafts
are corrected within a three-day period, you have to wonder how banks
continue to be allowed to charge their customers such exorbitant fees.
Let’s do the math on a “typical” overdraft fee from
your bank. Assume you borrowed $24 for a three-day period. If you paid
the “average” overdraft fee of $34 on that money, your “loan”
would end up costing you a whopping 17,000 percent in interest. Yes, that’s
seventeen thousand percent.
Re-Sequencing Increases Bank NSF Fees
One of the biggest concerns regarding bank overdraft fees involves the
way banks re-sequence a customer’s transactions in order to collect
more fees. Some banks deliberately process transactions, not in the order
the transactions were made, but in a way that maximizes the number of
overdrafts—and overdraft fees. This practice is known as “re-sequencing,”
and many larger banks are guilty of the practice.
As an example, you start the day with $100 in your account. You go to Starbucks
in the morning and spend $10. You then go to lunch and spend $50. You
now have $40 in your account. You then go to Lowes and spend $105 (more
than you started the day). Assuming you have asked for or opted into overdraft
protection, no one would argue that you are subject to an overdraft fee
on the Lowe’s transaction. However, the banks re-sequence the transactions
so the Lowe’s charge comes out of your account first. As a result,
you have three overdraft charges, rather than one. “They can’t
do that,” right. They do and are earning billions at your expense.
Wells Fargo Says It Will Put an End to Re-sequencing
Wells Fargo recently announced it would put an end to stacking for its
customers with a checking account. Although certainly a move in the right
direction, banking fees continue to run rampant. Other banks are stopping
the practice of overdraft fees if the amount overdrawn is a small amount,
say, less than $10, and are also “capping” the number of overdraft
fees an account can be charged in a single day.
Since banking revenues from charges and fees—including NSF and overdraft
fees—have more than doubled over the past three decades, banks are
obviously continuing to take customers’ hard-earned money any time
they can legally get by with it. In fact, when fifty of the largest banks
were analyzed, a full 40 percent of them continued to process transactions
from largest to smallest amount, regardless of the order the transactions
came in—a practice which is almost certain to result in additional
Consumers Must Demand Banking Changes
Since 80 percent of all banks allow overdrafts on ATM’s and debit
POS transactions, customers will continue to be hit with exorbitant overdraft
fees. The issue is certainly one which needs more regulations in place,
since the most financially vulnerable consumers are the very ones being
hit with such fees. Most consumers are in favor of having a transaction
declined rather than incurring an overdraft fee, therefore banks should
listen to their consumers (for a change), concentrating less on increasing
their own accounts and more on consumer satisfaction.
The consumer class actions lawyers at Golomb & Honik have been at the
forefront of the overdraft litigation for more than 10 years and have
recovered more than $1.2 billion dollars for consumers nationwide.
To learn more about your legal options or to schedule a free consultation call the
Philadelphia consumer protection lawyers at Golomb & Honik today at
1-800-355-3300 or 1-215-985-9177 or fill out our confidential
The national consumer protection lawyers at Golomb & Honik have successfully
represented individuals in Philadelphia, Pennsylvania, New Jersey, and
throughout the United States.