How to Spot Illegal Overdraft Fees
Written by AskTheLawyers.com™ on behalf of Tad Thomas with Thomas Law Offices.
Overdraft fees occur when someone’s bank account is charged with an amount exceeding its current balance. In this situation, the bank allows the payment to go through, approving the transaction but charging an overdraft fee. Overdraft fees are typically $35, though some people have reported higher fees. Excessive and illegal overdraft fees are a problem for people finding themselves in financial difficulty. Some places are considering making overdraft fees illegal on the whole, but until that happens, if you believe you may have been charged illegal overdraft fees, contact an overdraft fee attorney to learn about your options for recovery.
The Overdraft Protection law prevents banks from automatically enrolling customers in overdraft coverage.
This law means that a bank should not be able to approve a transaction for an account with insufficient funds or charge any overdraft fees unless the customer has explicitly opted into the program. If a customer has not opted into an overdraft coverage or protection program with their bank, yet they are faced with overdraft fees when their account overdrafts, the fees are illegal and should not be charged.
Current lawsuits against different banks allege that some are using unethical practices to push customer accounts into overdraft.
These practices include allegations of misrepresenting customers' account balances and reordering debits and credits to accounts in order to charge exorbitant or excessive overdraft fees. In 2013, the Consumer Financial Protection Bureau reported that 61% of the profits a bank brings in come from overdraft and insufficient funds fees. This is a notable amount of profit at over half of what a bank brings in; it is partially by this logic that investigations and lawsuits are underway regarding potentially illegal overdraft practices.
Similarly, multiple returned item or NSF fees should not be charged for the same transaction.
A returned item fee occurs when a transaction does not go through due to insufficient funds and is returned or rejected before the transaction can complete. In this case, a bank may charge a returned item fee or NSF fee. However, some people have found themselves charged with multiple returned item fees for the same transaction, which is another type of illegal fee.
Class action lawsuits are ongoing against banks that engage in potentially illegal overdraft and/or NSF fee practices.
If you believe your bank may be charging you with illegal overdraft fees or repetitive returned item fees for the same transaction, you may be eligible to join a current class action lawsuit or to begin your own. Some class actions have already been filed in regard to this problem resulting in a settlement to compensate the affected people.
If you are unsure whether you are enrolled in overdraft coverage or protection, contact your bank.
If you cannot remember whether or not you agreed to enroll in an overdraft protection program, reach out to your bank. They should be able to provide you with or direct you to documentation proving that you agreed to enroll in the program. If they cannot do so, this might be yet another indication that your bank is engaging in illegal overdraft fee practices. To learn more about your options for recovery and/or to take legal action, reach out to an overdraft fee attorney.