Washington, DCA consumer protection report has found a correlation between the banks that customers complain about most and the amount of revenue from overdraft fees and insufficient funds (NSF) those banks collect.
The 2016 report, issued by the US Public Interest Research Group (PIRG), analyzed more than 10,000 bank-related customer complaints submitted to the Consumer Financial Protection Bureau (CFPB) between March 2012 and November 2016.
The report found that over that time period, consumers complained most about Bank of America, Wells Fargo and Chase Bank in the Bank Account/Service category, concerning "Problems Caused By My Account Being Low." Of the top ten banks most complained about, nine were also among the top ten banks for collected overdraft and insufficient funds revenue through the first three quarters of 2015, according to the report.
Bank overdraft fees occur when you write a check, pay with a debit transaction or withdraw money from an ATM for an amount that exceeds your bank account balance. Banks typically charge around $35 for each overdraft fee.
"This relationship suggests that fees per account and complaints per account may be useful indicators for finding bank mistreatment of customers," states the report. "This relationship also supports the FDIC’s assertion that high overdraft fees may harm public opinion of banks, posing a 'reputational risk.'"
Overdraft fees are common but some banks' alleged excessive overdraft fee practices have prompted lawsuits from bank customers claiming that their bank rearranged the order of banking transactions in order to charge additional overdraft fees on subsequent transactions.
Shaina Dorsey, a Connecticut woman, sued TD Bank in January 2017 for damages of $5 million in a federal class action, alleging that the bank has a "routine practice" of wrongfully charging customers a "sustained fee" for overdrawn accounts.
In 2017, BOK Financial reached a $7.8 million class action settlement with former bank customers claiming excessive overdraft fees.
A class action was also filed in 2016 against Bank of Hawaii by Rodney Smith, alleging that the bank's overdraft fees were excessive. That lawsuit is pending in federal court.
According to the US PIRG report, bank overdraft/NSF revenue per account is "on the rise" and increasing," causing more people to become "unbanked," meaning they do not have a bank account.
"Households without a bank account miss out on important financial services, including safe and secure ways to save their money," according to the report. "Overdraft fees are one of many types of fees that can discourage people, especially those with low incomes, from getting or keeping bank accounts."
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