Consumers may have been mistaken when they thought overdraft protection
would help them save money and manage their checking accounts better.
Allegations have been made that certain banks misrepresented customers'
account balances and reordered debits and credits purposely forcing customers
into overdraft so the banks can collect overdraft fees.
An overdraft occurs when a customer makes a purchase for an amount greater
than their checking account balance. Most banks and credit unions will
pay the transaction regardless of the balance in exchange for a set overdraft
fee. Overdraft fees can be assessed on checks, debit card purchases, atm
transactions, and automatic or direct payments, and can be as high as $35.
A new study by the Consumer Financial Protection Bureau (CFPB) illustrates
how damaging overdraft fees can be, particularly when applied to debit
card users. Today, more consumers are using debit cards instead of checks,
and they are using them more frequently for impulse buys and small purchases.
As financial institutions began covering more of these transactions, they
have raised their fees for doing so. Currently, 60% of consumer checking
account income is generated by overdraft fees. In fact, the CFPB study
found that consumers pay an average of $260 annually for overdraft and
nonsufficient funds (NSF) fees for debit card purchases.
One major issue is that customers claim they never asked their banks for
overdraft protection. Debit card users just assumed that if they swiped
their card for a purchase greater than their account balance, the transaction
would be denied. Actually, the purchases were approved and an overdraft
fee charged, further plummeting the customer into overdraft.
Consequently, for every fee assessed, less money is made available to cover
transactions, but while the bank continues to approve the customer's
purchases, they are often unaware that they are continually overdrawing
their account.
Another consumer hot-button is the practice of reordering transactions
made by customers in one day so that their account goes into overdraft
more quickly and more overdraft fees are assessed than if the transactions
had been processed in the order in which they occurred.
As of July 1, 2010, financial institutions have been required to give new
customers the choice of opting in or declining overdraft protection on
debit card purchases. However, there is no legislation dictating the allowable
amount and frequency of fees.
Despite a few banks choosing not to hit debit card users with overdraft
fees, most banks still use it as a profitable means of generating income
at the customer's expense.
Consumer Protection Lawyers
If you have experienced an overdraft dispute with your financial institution
and are unable to reach a mutually agreeable resolution, it is imperative
that you seek legal representation immediately. This will help protect
you against further costs and could help you receive compensation for
any unjust fees that you have been assessed.
If you or someone you love has been a victim of unfair bank overdraft fees,
contact the national consumer protection lawyers at Golomb & Honik today at
1-800-355-3300 or 1-215-985-9177 or fill out our confidential
Contact Form. We have successfully fought credit card companies, banks, and financial
institutions and protected consumer rights for decades. Call us today
to review your case.
The national consumer protection lawyers at Golomb & Honik have successfully
represented individuals in Philadelphia, Pennsylvania, New Jersey, and
throughout the United States.