Credit union members may be unpleasantly surprised by overdraft fees, if their membership includes overdraft protection they didn’t realize they signed up for.
Overdraft protection is a service that many credit unions offer to prevent their members from bouncing checks. Banks offer it as well.
Traditionally, without overdraft protection the credit union will normally decline to pay the draft and will assess the member a non-sufficient funds (NSF) fee. Overdraft protection is meant to prevent that from happening.
How overdraft protection prevents a “bounce” from happening is by advancing additional funds to pay the draft, either from a linked account or by immediately extending the credit union member a line of credit.
This protection is supposed to be an opt-in service, and different credit unions have different ways of charging members for overdraft protection.
For example, Patelco Credit Union’s overdraft protection plan imposes different charges depending on the source of the funds used to cover the overdraft. The credit union charges a cash advance fee of up to $75 per transfer if the member elects to use a Patelco credit card to pay the overdraft.
The member could instead use a Patelco line of credit but would then be assessed interest on the debt at a rate comparable to some credit cards. Patelco Credit Union offers these options as alternatives to paying an NSF fee of $28 per transaction.
Meanwhile, over at Pentagon Federal Credit Union, members may have the option of using a $500 overdraft line of credit for no transactional fee – but only if they have qualifying credit. Pentagon Federal Credit Union members who don’t qualify risk an NSF fee of $30 per transaction.
Overdraft Fees: Regulation on the Horizon
Financial institutions in the U.S. have practically made an art of using overdraft fees to increase their revenue. Projected revenues from overdraft fees across the banking industry were projected to exceed $10 billion last year.
The Consumer Finance Protection Bureau (CFPB) has recently been taking a closer look at how financial institutions impose the costs of overdraft protection on their customers. Some institutions have been manipulating the way they assess overdraft fees to maximize the revenue from these fees.
One suspect practice is to rearrange the order in which the institution pays transactions in a way that maximizes the number of fees charged. Drafts posted in order of largest to smallest will empty the account faster, causing more of the drafts to trigger overdraft fees.
At some other institutions, customers have found themselves being charged for overdraft protection when they never intended to opt in to it. Other institutions transaction fees or interest on lines of credit that may be considered excessive.
The CFPB is drafting rules to prevent overdraft abuses like these. One option the Bureau is considering would be to beef up the disclosure requirements regarding the opt-in nature of overdraft protection. Some consumer groups say that current disclosures do not adequately clarify that customers can decline overdraft protection if they do not want it.
Other rules may ban the reordering of transactions to maximize fees. Several large national banks have already faced civil legal claims accusing them of manipulative transaction reordering, claims that have resulted in settlements worth hundreds of millions of dollars.
Do YOU have a legal claim? Fill out the form on this page now for a free, immediate, and confidential case evaluation. Some of the credit unions being investigated include, but are not limited to:
State Employees Credit Union
Pentagon Federal Credit Union
Boeing Employees Credit Union
Alliant Credit Union
Star One Credit Union
First Technology Federal Credit Union
America First Federal Credit Union
Randolph Brooks Federal Credit Union,
Suncoast Credit Union
Randolph Brooks Federal Credit Union
American Airlines Federal Credit Union
Mountain America Federal Credit Union
Vystar Credit Union
Space Coast Credit Union
Patelco Credit Union
The attorneys who work with Top Class Actions will contact you if you qualify to let you know if an individual lawsuit or class action lawsuit is best for you. Hurry — statutes of limitations may apply.
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Join a Free Credit Union Overdraft Fee Class Action Lawsuit Investigation
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!
An attorney will contact you if you qualify to discuss the details of your potential case.
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