It’s Not Just the Banks Charging Excessive Overdraft Fees

December 18, 2015, 8:00AM. By Heidi Turner

Tampa, FLIf you think it’s just the banks who have been accused of charging excessive overdraft fees, you'll have to think again. Yes, the banks have been at the front of most of the media concerning fees, but credit unions have also been accused of charging excessive fees. Although the battle concerning overdraft fees has been going on a few years now, lawsuits are still being filed against banks and credit unions alleging they’ve been gouging their customers to increase profits.

One of the latest credit unions to face a lawsuit over its practices is MidFlorida Credit Union, which allegedly violated federal law by charging overdraft fees even when customers had enough money in their accounts to cover transactions. According to court documents, plaintiffs allege MidFlorida Credit Union used an artificial available balance rather than the customer’s actual balance when determining whether an overdraft fee would be charged.

The lawsuit was filed by Tracy Fry and seeks class-action status on behalf of all US residents who have or have had accounts with the credit union and incurred overdraft fees for transactions even though they had sufficient funds to cover the transaction. Fry alleges that MidFlorida Credit Union states in its contract that overdraft fees are only charged when the customer does not have enough money in a bank account to cover a transaction. However, in making that determination, the credit union assessed overdraft fees based on an “artificial internal calculation” (referred to as the available balance), not based on the actual balance.

“The available balance is the actual balance minus anticipated debits in the future (that may or may not occur) and deposits that have not yet cleared pursuant to its funds availability policy,” court documents state. Thus customers who have enough money in their account at the time of a purchase are still charged an overdraft fee, based on transactions that are anticipated but have not actually occurred. Furthermore, because of the allegedly improper charging of the overdraft fee, some customers were pushed into overdraft and then charged overdraft fees on subsequent transactions.

In Fry’s case, the plaintiff was allegedly charged a $30 overdraft fee despite having money in her account to cover a debit transaction.

According to court documents, a 2012 study found that more than 90 percent of customers who were charged overdraft fees overdrew their account by accident, and more than 60 percent of transactions that resulted in a large overdraft charge were for less than $50. Among those who are most often charged overdraft fees are vulnerable customers who are younger, lower-income and non-white.

The lawsuit is Fry v. MidFlorida Credit Union, case no. 8:15-cv-02743 in US District Court, Middle District of Florida, Tampa Division.