Credit unions across the country have recently become the subject of many class action lawsuits for allegedly charging customers excessive and illegal overdraft fees. Among the credit unions under scrutiny are:
- Teachers Credit Union
- Citizens Equity Credit Union
- Alliant Credit Union
- State Farm Federal Credit Union
- And many more
If you have a savings or checking account with a credit union and have been charged unfair overdraft fees, you may have the option to initiate or join a lawsuit with the help of a consumer fraud attorney.
For more information, contact the Attorney Group. We offer free, confidential, no obligation consultations. We can help answer your questions, and if you choose to pursue a case we can connect you with an affiliated consumer fraud attorney who can assist you throughout the legal process.
Overdraft Fees
Overdraft fees are charged when an account holder spends more money than what is currently available in their account. For example, if you have $200 in your account, but you charge $220 at the grocery store, you would overdraft the account by $20.
Many credit unions will cover the overdraft, meaning they would allow you to spend the $220, even though you only had $200 in your account. In return, the credit union would charge you an overdraft fee. Overdraft fees vary by credit union, with some charging as little as $5 per overdraft and others charging as much as $35.
According to the Consumer Financial Credit Bureau (CFPB), the government agency responsible for protecting consumer rights in the financial sector, Americans paid close to $15 billion in overdraft fees in 2016 alone. In fact, over 60% of bank and credit union profits come from overdraft and insufficient funds fees.
Overdraft Fees Regulations
According to new federal laws that took effect in 2010, credit unions can no longer charge overdraft fees for ATM withdrawals and debit card charges, unless the customer agrees to opt-in. However, charges made by check and certain online purchases can still be subject to overdraft fees, even if you don’t opt-in.
If you don’t agree to opt-in to the overdraft coverage, you simply would not be allowed to charge or withdraw more than what’s in your account. The debit card charge would fail, or your debit card would be ‘declined’, and you wouldn’t be allowed to make the purchase or ATM withdrawal.
For consumers who opt-in to the overdraft coverage, the issues are often with how and when the overdraft fees are being charged.
Illegal Overdraft Fee Practices by Credit Unions
The first issue is simply the fact that many credit unions fail to properly explain the opt-in option to consumers. For example, many credit unions neglect to clarify that consumers who don’t opt-in can still be charged an overdraft fee for purchases made via checks. This has resulted in countless consumers being charged overdraft fees they thought they had opted out of.
There are several other common overdraft fee practices that are being challenged in current lawsuits.
Reordering Transactions – Many credit unions are being accused of deliberately reordering transactions so that the largest transactions are processed first, even if they weren’t charged first. For example, you may have purchased a small amount of groceries and a cup of coffee three days ago, and made your mortgage payment yesterday, but the credit union may process the mortgage payment first and the other purchases last. This makes it far more likely that you’ll overdraft your account, allowing the credit union to charge you a fee.
Authorization Holds – In 2017, a class action lawsuit addressed authorization holds. An authorization hold is made after a debit card purchase is made but before the merchant settles the transaction. In other words, as soon as you make a debit card purchase, the funds are held for the merchant, but not actually withdrawn from your account. When the merchant settles the account, sometimes several days later, the money is finally withdrawn from your account. In the meantime, the funds available in your account may look like more than what your credit union is showing you on your statement, making it more likely that you’ll overdraft your account.
Extended Overdraft Fees – By law, credit unions are only allowed to charge customers so much in interest. However, many credit unions are accused of charging overdraft fees some 7-10 days after a customers account has been overdrawn. Many lawsuits are alleging that these so-called ‘extended’ overdraft fees are nothing more than excessive interest charges that exceed federal limits.
How an Overdraft Fee Class Action Lawsuit Can Help
When a credit union engages in false or misleading advertising of its services or otherwise commits deceptive trade practices, they could be liable for any damage that may result.
Furthermore, the actions of the credit union could constitute fraud and violate federal consumer protection laws.
Compensation may be sought for:
- Costs incurred by customers
- Damages related to violations of consumer protection acts
- Attorneys’ fees
Account holders at various credit unions may be eligible to pursue damages through an overdraft fee lawsuit and are encouraged to seek the advice of an experienced consumer fraud attorney to learn more about their rights and remedies.
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