Scranton, PAConcerns over the potential for excessive bank overdraft fees are exacerbated this time of year with the return of students to school. That means back-to-school shopping and the bills that come with it. With more Americans trying to reign in their credit card debt and using debit cards tied to a checking account to make purchases, there is the risk of overspending.
When that happens, many consumers are buoyed by a false sense of security that comes with having overdraft protection. But that comes with a cost, and sometimes it can be substantial.
Bill Hardekopf, CEO of LowCards.com, referenced recent bank overdraft fee lawsuits in comments appearing this month in Tulsa World (8/19/12).
"Last week US Bank agreed to pay $55 million in a settlement," he said in comments to Action Line. "Other settlements include Bank of America with a $410 million settlement last year and Citizens Bank with a $137.5 million settlement in April 2012."
Americans have been feeling increasing amounts of frustration over bank overdraft fees, especially in light of what the banks are reporting in terms of revenue and profit from such fees.
According to Moebs Services, in data published in Tulsa World, banks collected a combined $31.6 billion in banking overdraft fees alone last year. This, at a time when many Americans continue to struggle economically.
Little wonder that Americans become fed up with having to pay such allegedly excessive fees and launch a bank overdraft fees lawsuit.
As for the return to class, many college and university students are heading off to their studies and contemplate being away from home for the first time. While an exciting time for both student and parent nonetheless, for many students it heralds the first time being outside the boundaries of a parent's watchful financial eye.
Richard Barrington, senior financial analyst for MoneyRates.com, noted in comments published in Investor's Business Weekly (8/20/12) that many banks charge high fees for each transaction the day when overdraft protection is triggered—rather than simply for the one transaction that exceeds the assets of the account and triggers the overdraft protection.
Those fees, says Barrington, can add up pretty quickly. "The average fee is now $29.83 per occurrence," he said. For a student having a minimum of financial acumen, such fees can prove draining on discretionary spending or even the college fund itself.
It was noted by Action Line in Tulsa World that the Federal Reserve Board, earlier this year proposed a rule linking overdraft 'privilege' or 'protection programs,' to a new standard of unfair and deceptive acts and practices. However the pro-fee lobby was strong enough for the Feds to give pause, announcing it would take no action on banking overdraft fees "at this time."
Meanwhile, an excessive overdraft fees lawsuit filed by a Lackawanna County couple against First Community Bank and Trust accuse the defendant of raking in "obscene profits" through its various overdraft fees, and the method(s) in which they are calculated.
Plaintiffs William and April Johnson note in their lawsuit that were transactions to have been calculated in the order in which they were made, there would be no overdraft. However, their lawsuit charges the bank of grouping several days worth of charges into a single batch, then paying the highest charge first even when lesser charges were incurred prior to the highest charge.
According to The Times Leader (7/23/12) of Wilkes-Barre, Pennsylvania, the practice causes the account to drop into a negative balance sooner than it otherwise might.
The bank overdraft fees lawsuit names First Liberty and its parent company, Community Bank NA of Canton, New York as defendants. It should be noted, according to the report, that First Liberty altered its policy in May of last year and now posts charges from the lowest to the highest, which favors the consumer instead of the bank. However, the plaintiffs are pursuing damages for the bank's past practices prior to May 2011.
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