Writer Halah Tourvalai, writing in Forbes Investing (6/11/13), provides the following example:
“Say you’re a student with $50 in your account,” Tourvalai writes. “You make three consecutive purchases for $10 each. That leaves you with $20, but you still need to buy a $40 book for class that evening. You decide to swipe your debit card anyway under the assumption you’ll be charged a $35 overdraft fee just once.
“Since most banks will process largest to smallest transactions the $40 book is deducted first leaving the student with $10, then the three $10 transactions are deducted. That would allow the bank to collect an overdraft fee two times, instead of one.” Or a $70 fee, instead of $35.
Here’s the thing - banks aren’t the only institutions capable of charging excessive overdraft fees. Smaller community banks and credit unions also charge overdraft fees and according to a report highlighted by The Washington Post in 2013, overdraft rates at the credit union level may be rising at a faster pace.
A report by Moebs Services, released July 8 of 2013, noted at the time that while the big banks were holding the line on overdraft fees at about $30 per transaction for the four years leading up to 2013, credit unions had increased their fees from $25 to $28 over the same period of time. While median overdraft fees remain lower at credit unions and community banks than the larger banks, they appeared to be rising at a faster pace than their commercial counterparts.
There has been much angst amongst consumers in recent years over excessive bank fees, and the frustration can extend to the credit union as well. And while many a plaintiff has taken legal action over the practice by some banks of re-ordering transactions in an effort to charge a higher fee (or series of fees), in the end a bank or credit union can only charge fees that are entrenched in fee agreements and contracts.
Most Americans don’t read the fine print. One attorney believes Americans should be and should remain vigilant as to the fees they are being charged to ensure the fees are proper.
“Not all overdraft charges are improper,” says Taras Kick, of The Kick Law Firm APC, in comments made to LawyersandSettlements’ Heidi Turner. “Some are proper. But some overdraft fees are improperly charged. If someone has overdraft fees from a credit union or small bank, they should look into it, because they may be right. It’s worth investigating.”
Of interest is Regulation E under the auspices of the Consumer Financial Protection Bureau that came into effect at about this time in 2010 - five years ago. To wit, Regulation E holds that it is illegal for a commercial bank, community bank or credit union to charge overdraft fees on a non-recurring debit card transaction unless the client has specifically opted in to overdraft protection for such purchases. A recurring purchase is typified as a bill payment or some other transaction that reflects a certain transaction pattern. Buying groceries using a debit card on the odd occasion should not trigger an overdraft fee provided the consumer has not opted in to overdraft protection for such purchases, and provided such transactions are few and far between.
READ MORE CREDIT UNION EXCECESSIVE OVERDRAFT FEES LEGAL NEWS
It’s worth talking to an attorney. That’s because credit unions, which are membership-driven and have different operating structures than commercial banks, are nonetheless subject to the same financial pressures stemming from the 2008 recession, according to The Washington Post (7/8/13). Like the big banks, credit unions have suffered high losses on loans. Bill Hampel, chief economist at the Credit Union National Association (CUNA), noted in The Washington Post that such conditions are probably contributing to increases in overdraft fees.
At the end of the day, it’s important to know what you’re being charged…