With the growing criticism against major banks and credit unions over large overdraft fees, along with other bank fees, customers have filed legal action to fight back.
Legal experts state that these financial institutions have employed these overdraft fee practices for years to maximize profits garnered.
Facing losing numerous customers and public face, Wells Fargo has recently decided to help protect their customers against these charges.
As of August 2015, Wells Fargo had begun processing customers’ checks in the order in which they were received, the same as how debit card purchases and ATM withdrawals are documented.
In the case of multiple transactions that were recorded at the same time, Wells Fargo now processes the lowest dollar amount first.
Wells Fargo explains that this will simplify the communication between their representatives and their customers, and make banking statements easier to understand.
This is a big step as banks have routinely processed purchases from highest to lowest to ensure that important payments were met, such as car payments or mortgages. Customers normally keep track of their spending by the order of the purchases, and do not expect to pay bills out of that order.
However, customers complain that this process often caused them to become overdrawn on their accounts, with their smaller payments left over.
This caused numerous bank and credit card holders to be charged additional money, for overdraft fees or insufficient fund fees, in order to pay for everyday expenses like groceries.
Overview of Credit Union Overdraft Charge Allegations
After years of outrage, consumers finally had enough and had started taking legal action against financial institutions for wrongful overdraft charges. This legal movement started four years ago, when a class action investigation was started into the overdraft charge practices of banks.
The overdraft fee lawsuit produced from that investigation had led to several major charges against banks mishandling overdraft fees, which were also found to be in violation of federal regulations. Ultimately, banks were forced to ask for customers to opt in to their overdraft protection program, rather than just start charging.
The legal pressure had forced Bank of America to pay $410 million in 2011 to resolve a massive overdraft fee lawsuit, which spurred the bank to end the practice completely.
JPMorgan Chase had also ceased overdraft fees for transactions under $5, after agreeing to a $110 million to settle their own overdraft fee lawsuit in 2012.
Wells Fargo is still fighting overdraft legal issues and is in the process of appealing a 2010 judgment, which required the bank to return $203 million to customers in wrongful overdraft fees. While Wells Fargo did not completely drop their overdraft fees, they did implement decent preventative measures.
Essentially, all major banks in the United States were subject to investigation for alleged improper overdraft fees, which spurred major policy reform.
According to a recent study from Pew Charitable Trusts released in April 2015, banks are gradually dropping high-to-low transaction processing completely. Out of the 44 big banks in America reviewed by researchers, 51% did not practice high-to-low transaction indexing, compared to 46% in 2013.
Banks are also eliminating many hidden fees that often incite consumer dissatisfaction, which often spur them to leave to alternative financial institutions like credit unions.
However, recent news indicates that credit unions may be just as bad as big banks when it comes to overdraft fees. Over the last few years years, credit unions have reportedly been raising overdraft fees and other charges, and have also been accused of improperly indexing transactions.
Like disgruntled bank customers, credit unions have also been accused of ordering transactions from highest to lowest, leaving consumers to be charged exorbitant overdraft fees for small purchases. A number of credit unions are already facing scrutiny for this practice including:
- Teachers Federal Credit Union, Smithtown, NY
- ESL Federal Credit Union, Rochester, NY
- Delta Community Credit Union, Atlanta, GA
- Police & Fire Federal Credit Union, Philadelphia, PA
- Pennsylvania State Employees Credit Union, Harrisburg, PA
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If your credit union charged you overdraft fees, you may have a legal claim. Fill out the form on this page now to find out if you qualify!
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