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Bank of Hawaii Excessive Overdraft Fees

Santa Clara, CA: In 2016, Bank of Hawaii was accused of unfairly assessing overdraft fees in an excessive overdraft fees class action lawsuit.

The complaint, Smith v. Bank of Hawaii, Case No. 1:16-cv-00513, in the U.S. District Court for the District of Hawaii, alleged that the Bank of Hawaii charged overdraft fees on accounts that had enough funds to cover the supposed overdrawn amounts. The complaint stated that Bank of Hawaii’s Account Agreement, which governed the plaintiffs’ accounts, assessed an overdraft fee only when the customer’s account does not have enough money to cover the transaction.

However, the lawsuit claimed that the bank failed to accurately disclose its overdraft policy in its opt-in notice, which did not fully describe the method used to assess overdraft fees.

The Bank of Hawaii allegedly violated its agreements by using the available balance method to determine whether an account holds enough money to cover a given transaction. The “available balance” consists of the account’s actual funds minus credit holds and anticipated future debits. The available balance tends to be lower than the ledger balance, which is the sum total of all settled transactions without regard for anticipated transactions.

Using the available balance method in determining overdraft fees tends to result in more transactions overdrawing the account and qualifying for an overdraft fee, and this practice has received criticism from the Consumer Financial Protection Bureau, (CFPB). In a study of this practice, the CFPB of actual bank practices found that “in some instances, transactions that would not have resulted in an overdraft (or an overdraft fee) under a ledger-balance method did result in an overdraft (and an overdraft fee) under an available-balance method.”

Lending violations and deceptive practices occur when companies involved in the financial industry take advantage of consumers for their own financial gain. They allegedly do so to make a larger profit, to decrease the amount of money the financial institution spends, or to make the financial institution appear more financially stable than it actually is.

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