The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- U.S. Bank Raising Overdraft Fees
Huffington Post (05/17/12) Nelson, David 17 May 2012
U.S. Bank is hiking overdraft fees for all accounts, starting on June 29. Instead of charging $33 on overdrafts of $20 and up, it will impose a fee of $35 on customers who overdraw their account by $15 or more. Smaller violations, in the range of $10 to $15, will trigger an overdraft charge of $15, revised from the previous charge of $10 on overdrafts of less than $20. The Minneapolis-based bank will continue its policy, adopted in 2010, of giving a pass -- no charge at all -- to account holders who overspend by fewer than $10. The new fee schedule brings U.S. Bank's overdraft fees more in line with those of other major financial institutions, including Bank of America. "This change is part of an overall review of our deposit fees which will include the elimination of other fees," said bank spokeswoman Teri Charest. For example, the bank said it is eliminating the fee to close an account early and lowering fees for a stop payment.
- Fed Up With Big Banks
Huffington Post 17 May 2012
On May 16, both New York and Los Angeles city councilors passed laws that will shift public dollars into more local, responsible banks. The moves are expected to be followed by dozens of other cities and towns. City Responsible Banking ordinances are contributing to a growing grassroots movement that is holding big banks accountable for damage to local neighborhoods. Individuals and religious groups are transferring millions of dollars out of Chase, Wells Fargo, Bank of America, and Citi and depositing them into more local, community-minded financial institutions. Organizations such as Brooklyn Congregations United and LA Voice have built up community support for the measures. Large banks, seeking to hold on to public dollars, lobbied heavily to dilute the legislation in New York and Los Angeles. Although municipal governments cannot regulate Wall Street, many local officials believe the federal government has been too easy on big banks; and so cities are attempting to limit their influence. When individuals, religious institutions, and local and state governments move their money out of larger banks, it adds pressure for those institutions to change their policies.
- PNC Customers Win Class Certification in Overdraft Suit
Bloomberg 17 May 2012
Customers of Pittsburgh-based PNC Bank have been granted court permission to proceed as a class in their lawsuit accusing the bank of charging exorbitant overdraft fees. PNC allegedly used software to reorder customer transactions from highest amount to lowest, causing accounts to be depleted faster and triggering more overdraft penalties. At least 30 banks have cases before U.S. District Judge James Lawrence King in Miami, who awarded the PNC class certification in an order. "Nearly all of the class members in this case have claims that are so small that it would cost them much more to litigate an individual case than they could ever hope to recover in damages," he wrote, "and thus there is no reason to believe that the putative class members in this case have any particular interest in controlling their own litigation."
- TD Bank Agrees to Pay $62 Million in Overdraft Fee Lawsuit
Bloomberg 11 May 2012
Toronto Dominion Bank (TD) has reached a preliminary agreement to pay $62 million to settle litigation accusing it of gouging customers on overdraft fees for checking accounts. The settlement would resolve claims by consumer account holders who sued over fees charged to debit cards attached to their checking accounts. U.S. District Judge James Lawrence King in Miami must approve the settlement. On April 3, King certified the case as a class-action lawsuit.
- How Much for That Coffee?
New York Times 09 May 2012
Until 2010, U.S. banks could automatically enroll customers in overdraft programs, which earned the banks tens of billions of dollars in overdraft fees. Then the Federal Reserve began to require that banks obtain customer’s consent before enrolling them. The New York Times notes, however, that banks should also be required to have more "proportional" penalties -- meaning, for instance, that overdrawing on a cup of coffee should not incur a fee of $35. Moreover, the editors say banks should develop ways to notify consumers before they overdraw on their accounts. While overdraft revenue has fallen by about 15 percent, by one estimate, the newspaper argues that there is room for improvement. A 2011 study by the Center for Responsible Lending found that many banks do not fully explain their overdraft policies and have even bullied customers into opting in. The Pew Charitable Trusts Safe Checking Project, meanwhile, recently reported that more than half of customers with overdraft "protection" did not realize they had opted in. Because of this, the federal Consumer Financial Protection Bureau may need to require financial institutions to explain their overdraft programs more clearly and disclose complete pricing information about their overdraft options. The majority of consumers who have had to pay overdraft fees say that they would have preferred that the bank decline transactions when their accounts are empty, according to the Pew research.
- Desperate for Cash? Beware Predatory Creditors
Fox Business 09 May 2012
Many unscrupulous lenders of costly loans target consumers who may not be able to repay the loan -- including the elderly, people with limited education, and those with weak credit histories -- according to the Center for Responsible Lending (CRL). Although often associated with payday loans and subprime mortgages, predatory lending practices also may be found in home improvement, auto financing, car title, and tax refund anticipation loans. An increasing number of reputable banks also offer high-cost, short-term loans, although they are usually called “account advances,” says CRL spokeswoman Kathleen Day. “These loans can have an APR (annual percentage rate) in the triple digits,” she notes. “All high-cost, short-term loans trap people. ... They are designed to make you come back over and over again for more loans.” One bank charges $2 in interest for each $20 borrowed under its "checking account advance" loan and adds a $35 late fee if it is not repaid within 10 days. A $400 loan under that scenario would cost $40, the equivalent of 365 percent APR. Predatory lenders may try to get consumers to borrow more money than they can afford, claim that bad credit is not a problem, ask a borrower to make false statements on a loan application, or ask a borrower to sign blank paperwork. These lenders also may charge excessive late penalties or put in fine print that the borrower cannot take legal action against the lender. Potential borrowers should ask certain questions before signing, such as the actual rate of interest when including all loan origination fees and prepaid interest, the loan's payoff period, and whether the loan rate will go up or reset. Consumers who believe they are caught in a predatory loan can contact the Consumer Financial Protection Bureau or consult with a legal aid attorney.
- House Dems Set Sights on Overdraft Fees
The Hill 09 May 2012
House Democrats on May 9 introduced the Overdraft Protection Act, which would cut back on how and when banks charge overdraft fees. While existing rules require banks to obtain consent from customers before activating overdraft fees on debit card transactions, the new law would apply that stipulation to paper checks and automated charges as well. "With the rise of debit cards and the constant presence of swipe-card terminals to pay for everything from a tank of gas to a candy bar, it's easier than ever to overdraw an account and incur an overdraft fee," said bill sponsor Rep. Carolyn Maloney (D-N.Y.). "It is quite clear more needs to be done in the area of consumer disclosures and to help consumers avoid multiple overdrafts." Under the measure, fees would be limited to a "reasonable and proportional" amount of the actual overdraft amount; and banks would not be allowed to shuffle the order in which they process transactions. Additionally, an individual account holder could not be charged more than once a month for overdrafts and no more than six times annually. Thirty-eight Democrats have signed on to the legislation.
- Chase Launches New Alternative to Checking Account
Associated Press (NY) 08 May 2012
JPMorgan Chase has introduced its new prepaid card, intended to provide an alternative to checking accounts. The reloadable Chase Liquid card is now available at 200 branches and will roll out nationwide this summer. The move comes as the mega-bank and others tries to recoup fees lost in the wake of a regulatory crackdown. In 2010, rules took effect prohibiting banks from signing up customers for overdraft programs without their consent. Banks took an additional hit last summer when rules were issued limiting debit card interchange fees. Chase's prepaid carries a fee of $4.95 per month. The bank is calling the card a "low-cost alternative to traditional checking accounts" with "clear and simple" terms. An increasing number of big banks have cut rewards program, introduced new accounts with higher fees, and launched new products such as prepaid cards. Chase said customers will have to provide a $25 deposit for the Liquid card but are not required to have a checking or savings account with the bank. Withdrawals and customer service support do not cost anything.
- Overdraft Fees Hit Unsuspecting Consumers
CBS News 04 May 2012
Reforms have been in place for two years requiring consumers to explicitly opt in to bank overdraft programs that charge them a fee to cover debit transactions exceeding the account holder's available funds. Despite this, a new report by the Pew Charitable Trust found that over half of the consumers who were charged an overdraft fee in the past year did not know that they had overdraft coverage. More than a third of consumers surveyed said they did not realize their bank offered the overdraft coverage until they incurred a penalty. Those under the age of 44 and those with less than $30,000 in income were twice as likely as older, wealthier consumers to incur overdraft fees. Overdraft "opt-in" rules only affect ordinary debit transactions, such withdrawing money from an ATM or swiping a debit card to make a purchase. Most banks automatically cover overdrafts, and charge a fee, if consumers overdraw their accounts by writing a check or making an automatic payment. Research has found that many consumers may be confused by banks' opt-in processes; some believe that they must sign a form to opt out, when it is really the opposite. The Pew survey also found that 75 percent of consumers said they would prefer that a transaction be declined for insufficient funds than paid at a cost. Thirty-five percent had closed an account as the result of overdrafts. Twenty-six percent of those who were charged an overdraft fee found out only through a monthly checking account statement.
- Fifth Third Bank Charges Customer $300 in Overdraft Fees Without Notifying Him: Report
Huffington Post 03 May 2012
According to the Consumerist, Fifth Third Bank charged a customer $300 in overdraft fees without his knowledge -- even though he was enrolled in a program that was supposed to alert him if he was overdrawn on his account. Despite being signed up for overdraft notifications, the consumer blog reports that the account holder received none. He said he was surprised to find out that he had about $300 in overdraft fees -- a daily penalty as well as a fee for each purchase -- leaving his bank account in a $700 deficit. The bank has had similar complaints recently after a man claimed the bank charged overdraft fees on an account that he had previously closed. Fifth Third settled an overdraft fee lawsuit in 2010 after allegations of high-to-low transaction ordering, which results in a higher number of fees. Additionally, according to the National Consumer Law Center, the bank is now dabbling in payday lending, charging $10 for every $100 borrowed.
- Class Action Lawsuit Filed Against Trustmark National Bank in Memphis/Shelby County, Tennessee Regarding Improper Overdraft Fees
Beaumont Enterprise (TX) 02 May 2012
A class-action lawsuit has been lodged against Trustmark National Bank in Shelby County, Tenn. The bank is accused of engaging in improper practices related to overdraft fees on consumer checking accounts. According to the suit, Trustmark has used these unfair practices to increase the number of overdraft fees consumers incur. White v. Trustmark National Bank was filed on April 30, 2012. The case proposes a class action on behalf of Trustmark customers in Tennessee, Mississippi, Florida, and Texas -- where the bank has a total of 186 branch offices. The suit alleges that Trustmark routinely enforces a policy that posts debit transactions to consumer accounts in order of largest to smallest by dollar amount, rather than in chronological order, to maximize the number and amount of overdraft fees. The complaint alleges that Trustmark could program its software systems to minimize these fees without added cost or risk to the bank but instead programmed its systems to manipulate transactions to maximize fee income. The suit claims that these practices are a breach of contract.
- Profits Are the Reason for Fees, Not Risk or Costs
New York Times 29 Apr 2012
Consumer advocates have been warning American consumers to avoid check cashers and payday lenders by placing their money in a bank. However, they are changing their tune as some banks have become just as bad. While overdraft fees have been a problem for a while, now some banks are also making account advances, which are very similar to payday loans. The short-term loans often come with triple-digit annual percentage rates and the ability for the bank to repay itself by taking money out of the consumers' bank account. The trend of banks offering such short-term loans is spreading, leaving vulnerable members of society such as working families and the elderly to pay the price. While the banks claim the fees are due to the risk they must take to lend to consumers with poor or no credit, the loans are incredibly profitable, allowing banks to reap billions in profits every year.
- The Myth of Free Checking
U.S. News & World Report 27 Apr 2012
Although many banks and credit unions may advertise "free" checking accounts, customers have been paying more fees for these services than ever. Research firm Moebs Services reports that consumers paid $31.6 billion last year in overdraft fees. According to a survey by Ally Bank, consumers paid $7.1 billion in ATM fees in 2010. Many institutions also charge for checks, maintenance fees, and debit card fees. Customers can avoid heavy fees by carefully considering whether they can meet the minimum balance requirement each month, if there is one; by signing up for alerts when the account balance gets below a certain amount; and by knowing where fee-free ATMs are available. Consumers also may want to look for checking accounts that offer rewards, such as interest or cash back, or for prepaid cards -- if they are used carefully.
- Citizens Bank to Pay $137.5M to Settle Overdraft Suit
Boston Globe Online 25 Apr 2012
Citizens Bank agreed to pay $137.5 million to settle a class-action lawsuit accusing it of deliberately processing customers’ debit card and ATM transactions in such an order as to generate excess overdraft fees. The suit is part of multi-district litigation involving more than 30 different banks before US District Judge James Lawrence King in Miami. Bank of America last year agreed to pay $410 million to settle similar charges, and JPMorgan Chase this past February agreed to pay $110 million. “We think [that re-ordering transactions from highest amount to lowest is] a bogus practice if it causes overdrafts,” said Linda Sherry of the advocacy group Consumer Action. However, she added, the high cost of litigation has deterred many banks from shuffling transactions and encouraged them to instead process payments in the order they were made. “Actions like this do set some precedent,” she said. “It sends a huge message to the industry.” Still, some consumer interests continue to push regulators to crack down even more on overdraft fees -- for example, by extending the consent requirements for overdraft protection to checks and by forcing banks to better explain the potential cost of signing up for coverage. “The banks go out of their way to make it sound like a wonderful thing, but it’s not,” Sherry said.
- Overdrafts Under Scrutiny: Lawsuit Claims Gate City Manipulates Debits, Checks to Maximize Fees; Bank Says 'Absolutely Not'
INFORUM 11 Apr 2012
A North Dakota bank is facing a federal class-action lawsuit alleging that it rips off consumers by re-ordering checks and debit processing so as to maximize overdraft fees. Filed on April 3, the lawsuit by Amber Pieloor claims that Gate City Bank "batch files" its checks and debit card transactions, sequencing them so that the biggest transactions are debited first. Numerous banks throughout the country are facing similar allegations. Steve Swiontek, president and CEO of the bank, insists that transactions and deposits are processed in the order in which they are received. He said the nature of the transaction can affect the amount of time it takes to post, explaining that a check or debit card transaction can be processed quickly but that debit transactions using a signature may take a couple days to clear. The lawsuit, however, claims that the actions of ordering the transactions from highest amount to lowest constitutes a breach of contract, unjust enrichment, and a violation of the North Dakota Unlawful Sales or Advertising Act. According to Center for Responsible Lending statistics cited in the court filings, financial institutions in 2008 saw a 35 percent increase in overdraft revenue over 2006.
- BancorpSouth Agrees to Settle Overdraft Lawsuit for $1.75M
Memphis Business Journal 09 Apr 2012
BancorpSouth Bank has agreed to a $1.75-million settlement in a class-action lawsuit involving improper overdraft fees. The bank also agreed to amend its overdraft practices. This case was settled in the U.S. District Court for the Western District of Arkansas. The suit alleged that BancorpSouth's overdraft fee assessment procedures were unlawful, though the bank denied any wrongdoing.
- Stu Straus Charged $1,500 in Fees for Wells Fargo Account He Thought Was Closed
Huffington Post 09 Apr 2012
A West Orange, N.J., man was charged $1,555.61 in overdraft fees after Wells Fargo, without his knowledge, reopened an account he thought had been closed. The fees began with a $10 overdraft fee incurred in 2007, triggered by a forgotten automatic payment from UPS. The payment caused his checking account to overdraw and reopened a line of credit linked as automated overdraft protection. However, small businessman Stu Straus had believed his accounts were closed for good and was never told that he had overdue debt that was snowballing by the day. Wells Fargo eventually rescinded the fees and permanently closed the accounts, but the anecdote illustrates how difficult it is to close bank accounts in the era of electronic payments, automatic billing, and special lines of credit for overdrafts. Last month, in the wake of escalating consumer backlash, the Consumer Financial Protection Bureau set up a customer complaint forum on its Web site just for checking accounts. Currently, there is no standard regulation among banks that addresses account termination and mobility. Each of the nearly 7,000 U.S. banks writes its own account-closing rules. The burden is completely on customers; and simply informing a teller that you want an account closed is not enough. After a customer closes an account, he or she must double- and triple-check that all related automatic payments have been moved to the account, and then write a letter to the bank confirming the account closure.
- TBL: Elderly Woman Bounces 70 Checks, Webster Bank Charges $2,500 in Fees
Courant.com 07 Apr 2012
While the Consumer Financial Protection Bureau is working to protect Americans from excessive bank fees and late charges, the country's elderly and low-income population continues to suffer. A situation at Webster Bank in West Hartford, Conn., highlights just such a problem. An 88-year-old customer reportedly bounced 70 checks in three months last year, each infraction triggered a penalty of $36; and instead of calling her, the bank charged her more than $2,500 in overdraft fees. Like many banks, Webster mailed out written notices to Lasalle. But the elderly woman's son-in-law said the bank never called her to inform her of the situation. The checks were written out to charitable organizations, according to her family. After receiving numerous notices in the mail, Lasalle became concerned and contacted family members. In July 2011, the bank agreed to reduce the charges by $350 and by another $150 in August. But after that, Webster said it would not reduce the charges, saying that the fees were legitimate and that it notified the customer. However, the bank said that it is reviewing its overdraft policies.
- Comerica Customers Seek Mediation of Overdraft Dispute
Bloomberg 06 Apr 2012
Comerica Inc. customers are seeking private mediation in a lawsuit targeting the bank’s overdraft fees, according to a court filing. Mediation is "an effort to resolve this action without further litigation," according to a joint motion filed April 5 in federal court in Miami. The first session is scheduled for May 23. At least 30 banks have cases before U.S. District Judge James Lawrence King in Miami, with customers alleging that the banks shuffle debit-card transactions to maximize overdraft penalties.
- Regulators Cite BankAtlantic Overdraft Protection Program
South Florida Business Journal 06 Apr 2012
The Office of Thrift Supervision recently gave BankAtlantic a rare "needs to improve" rating on its Community Reinvestment Act exam. While the exam was mostly positive, the federal regulators determined the bank engaged in illegal practices involving automatic overdraft protection. Regulators found that the company participated in illegal and deceptive practices, which negatively affected a large number of customers. However, it is unlikely that any type of penalty will be imposed.