Fifth Third Bancorp Faces Excessive Overdraft Fees Lawsuit

Fifth Third Bank and other financial institutions have faced allegations that they used deceptive practices in charging customers excessive overdraft fees. In 2011, Fifth Third Bank settled a class action filed on behalf of customers claiming they were charged excessive overdraft fees due to "reordering" of transactions in order to create overdraft situations and maximize profit from overdraft fees. Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio and is one of the largest banks in the Midwest. As of March 2016, Fifth Third Bank had $303 billion in assets under care, of which it managed $26 billion for individuals, corporations and not-for-profit organizations.

In July 2011 Fifth Third Bank agreed to a settlement of $9.5 million in a class action lawsuit Shannon Schulte et al. v. Fifth Third Bank, Case No. 0:09-cv-6655,US District Court, Northern District of Illinois, Eastern Division filed in November 2009.

In the lawsuit, class members who were Fifth Third accountholders claimed that Fifth Third Bank improperly assessed overdraft fees for insufficient funds on debit card purchases and ATM withdrawals by "re-sequencing" the order of transactions to maximize the number of overdraft fees.

The lawsuit was transferred in March 2010 to a checking account overdraft multidistrict litigation (MDL), the federal court mechanism that allows multiple, similar cases to be handled by the same judge.

The lawsuit alleged that Fifth Third Bank did not process debit card and ATM transactions in strict, chronological order but instead, went in a high-to-low order.

For example, high-to-low order might go something like this: if a customer has $100 in an account, and makes three transactions, two for $25 and one for $120, in that order, re-sequencing would place the $120 transaction first, draining the account so that rather than charging one overdraft fee for the $120 transaction, the bank could charge three overdraft fees.

In the order approving the $9.5 million settlement reached between class members and Fifth Third Bank, Thomas Tarter, an expert on banking and financial institutions reviewed settlement-related documents, Fifth Third Bank's public filings and the bank's website, along with additional information provided by Fifth Third, including non-public and confidential documents.

Tarter estimated that during the class period, Fifth Third Bank collected approximately $97.7 million as a result of its re-sequencing policy.

As part of the settlement agreement, Fifth Third Bank agreed to modify its business practices to no longer re-sequence debits from highest to lowest amount and instead process all charges in the actual order they are presented.
  According to a Dec. 2016 consumer protection report published by US Public Interest Research Group (US PIRG), reported overdraft and non-sufficient fund (NSF) revenue per bank account is on the rise.

From the US PIRG report:

• The average bank collected $17.76 in overdraft/NSF fee revenue per consumer deposit account in the first three quarters of 2016, an increase of 2.6 percent over the same period in 2015. Many banks with the highest overdraft revenue "rely heavily" on overdraft revenue.

The 10 banks that collected the most overdraft revenue through the first three quarters of 2016, in order, were: Chase Bank, Wells Fargo, Bank of America, TD Bank, US Bank, PNC Bank, Suntrust Bank, Regions Bank, Branch Banking and Trust, and Woodforest National Bank.

These banks collected an average of $98 in overdraft revenue per non-retirement deposit account, more than five times the national average. Five of the ten banks would have seen a net income loss in the first three quarters of 2016 without overdraft revenue.

According to the US PIRG report, Fifth Third Bank received 113 complaints for "problems caused by my account being low" per 10,000 accounts between Jan. 2015 and Sept. 2016. Average overdraft fees per account were $41.65.
 

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Last updated on Sep-2-20