Consumers Continue to Get Stung by Excessive Credit Union, Bank Overdraft Fees

March 14, 2016, 8:00AM. By Gordon Gibb

Washington, DCIt is a situation that continues to plague American consumers: excessive and confusing overdraft fees that are costing Americans millions of dollars in often needless debits from their accounts. Sometimes such fees and overdraft programs serve to push consumers deeper into debt. And while the big banks historically take the most heat for this issue, credit unions are not immune. To that end, in November of last year, plaintiff Mary Chambers filed a class-action Credit Union Excessive Overdraft Fees lawsuit against NASA Federal Credit Union, alleging breach of contract over the implementation of an overdraft fee program.

Excessive overdraft fees - stemming from a major bank or a credit union and thereby framing a Credit Union Lawsuit - appear to be a continuing issue in spite of various regulations passed in 2010 intended to provide more transparency. This, according to an in-depth treatment given to the issue by the International New York Times (3/1/16).

We hear the story of Angelina Lemus, a health care worker who was confused about the monthly debit of nearly a hundred dollars from her bank account. Upon investigation, it appeared that Citibank - Lemus’s lender - was using a line of credit to cover overdrafts in her account, and charging Lemus 18 percent interest on an outstanding line of credit Lemus claimed she had never signed up for in the first place. The International New York Times reports that it would have taken Lemus 13 years to pay the money back simply following the monthly payment plan.

Then there is the story of Mark Mangan, who banks with the TD Bank in Bloomfield, New Jersey. Mangan claims in the International New York Times report to have been hit with as much as $140 in overdraft fees in a single day. “[The bank’s] position is, ‘If we disclose it, we can get away with whatever the hell we want,’” Mangan told the International New York Times.

The tech consultant told the newspaper that he had noted a $35 overdraft fee that he had been charged, even though he still had sufficient funds in his account. Later in the day, Mangan withdrew $20 at the ATM from his account, but still left a few dollars in. That night, the bank processed a check for $125 Mangan had written days earlier. That would have - and indeed did - leave the account in an overdraft situation, and Mangan would have expected to have been charged an NSF fee for the bounced check. And he was…

But he was also charged an overdraft fee for the $20 withdrawal, which Mangan disputes. “I had that money in my account. I have the slip to prove it,” Mangan said.

Like those of the big banks, credit union customers are not immune to overdraft charges, as all banks and credit unions employ various programs and strategies to deal with overdrafts. The International New York Times noted that the Navy Federal Credit Union employs an overdraft protection service it dubs “OOPS,” which is strategically named “Optional Overdraft Protection Service.”

Advocates note that many consumers, most of whom make honest attempts to manage their finances wisely, have nonetheless little awareness as to how overdraft protection works - many mistakenly believing that such protection prevents withdrawals, debits and other negative transactions from going through if there are insufficient funds in place. In reality, however, there are fees and overdraft protection programs that some consumers had little clue that they had, somehow, opted into.

There has been widespread criticism of banks and credit unions employing the practice of re-ordering transactions, as they see fit, in order to maximize fees.

That has led more than a few consumers to launch an Excessive Overdraft Fees Lawsuit. The Chambers credit union lawsuit is Mary Chambers v. NASA Federal Credit Union, Case No. 1:15-cv-02013, filed November 17 of last year at US District Court, District of Columbia in Washington.