Bank Overdraft Fees Can Drain Account Balances

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 Legal 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 Legal have successfully represented individuals in Philadelphia, Pennsylvania, New Jersey, and throughout the United States.