There are a number of benefits associated with credit unions. Members of the nonprofit institutions typically receive personalized customer service, higher interest rates on savings, lower fees and loan rates, and may even have a say on important decisions the institution makes. There are times, however, when credit unions act negligently. Some credit unions take advantage of their members with unlawful overdraft fees.
Banks routinely use overdraft fees as a means to increase profit by preying on their own customers in their time of need. While some overdraft fees are legitimate, many are not. For example, overdraft fees labeled as “extended” or “continuous”, banks charging overdraft fees on their own service fees, or banks charging overdraft fees on transactions where your account was positive at the time of the transaction are not legal practices. If you’ve been a victim of illegitimate fees, Thomas Law Offices is here for you.
How Are Credit Unions Illegally Charging Overdraft Fees?
There are primarily three ways credit unions unfairly charge their members overdraft fees. Unfortunately, some members may not even realize they’ve been charged. The illegal actions include:
- Charging “Extended” or “Continuous” Overdrafts Fees. Some credit unions charge members additional fees when they fail to replenish their accounts after being hit with an overdraft fee. These fees may be referred to as “extended” or “continuous” because they are charged separately from the original fee.
- Reordering Transactions. This happens when a credit union charges as many overdraft fees as possible by reordering customer transactions. Instead of debiting a customer’s account in the order the transactions were made, they’ll process the debits in highest-to-lowest order. This maximizes the number of overdraft fees that can be charged.
- Breaching Contracts with Fees on Everyday Purchases. There are instances where credit unions are levying overdraft fees on everyday purchases, like dinner at a restaurant, even when member contracts say that can only happen on recurring transactions, such as a mortgage payment.
When Are Overdraft Fees Legal?
While the previous section discussed how credit unions are illegally charging overdraft fees, there are times when it is perfectly legal for the money to be withdrawn. When you spend more money than what you have in your account, that account goes into a negative state. That is referred to as an overdraft. An account can be overdrawn by withdrawing cash, writing a check, swiping a debit card, or through an established Automated Clearing House (ACH) payment.
To avoid overdraft fees, take the following into consideration:
- Keep an eye on your account balances.
- If you can, set up scheduled alerts for low balances.
- Opt out of overdraft coverage.
- Keep track of when you deposit money versus when money is being taken out to ensure that timing will not be an issue.
- Make sure you understand your bank’s overdraft policy and how they notify members in the event they overdraw.
- Link your account to another account that money can be drawn from in the event of an overdraft.
- If you do overdraw, transfer or deposit money as soon as possible.
How Can Thomas Law Offices Help?
There are a number of financial institutions that are being looked into regarding illegal overdrafts. Our law firm is currently investigating a potential class action lawsuit against multiple banks and credit unions in Kentucky. If you are a member of a bank or credit union and believe you have been charged an unfair overdraft fee or otherwise wronged, our attorneys may be able to provide you with answers.
Financial institutions should be held accountable in the event they have taken advantage of their members in any way. A class action lawsuit could help victims get back any overdraft fees they were wrongfully charged. The lawsuit could also dissuade other credit unions from breaking the law and put an end to these types of questionable practices.
Contact us today if you have done any of the following:
- Paid overdraft fees
- Paid “extended” or “continuous” overdraft fees
- Paid overdraft fees on service fees
- Paid overdraft fees when your account was positive at the time of the transaction
We will investigate your claim and provide you with the legal knowledge you need to take the appropriate actions.