[tomder55]

Are there any class action suits pending against banks or other lending instituions over outrageous fees charged for overdraft of debit cards ?

Here is a letter I sent to my Congressional Representative this weekend :

Sir ,

My daughter has been a frequent victim of what I consider to be usury practices by HSBC regarding unfair fees for the "courtesy " overdraft protection they provide on their debit card student account. This effectively turns her debit card into a high-cost credit card with loan/fee rates that greatly exceed what she could get from a payday loan service ;or frankly from a mob loan shark.

As I research this I find that this is a common consumer complaint across the country that has not been addressed . Abusive overdraft loan practices are costing consumers $17.5 billion in fees per year.

Rep. Carolyn Maloney, D-N.Y. has sponsored legislation that would require banks to notify consumers before imposing overdraft fees, similar to fee notifications required at ATMs for cash withdrawals(H.R. 946, "The Consumer Overdraft Protection Fair Practices Act." ).
H.R. 946: Consumer Overdraft Protection Fair Practices Act (GovTrack.us)

I believe that should be a minimum amount of protection a user of the bank services should be entitled to . Additionally I believe a debit card applicant should have the option to waive overdraft protection .It would be much better for them to be refused at the point of purchase than to pay $35-$40 dollars for a McDonalds cheeseburger.

I urge you to co-sponsor this legislation and do what you can to get H.R.946 passed and signed into law.

...
There is no equivalent legislation the US Senate at this time. While Congress concentrates on the sub-prime mortgage problem it appears that they are neglecting an abuse by the banks that probably affects more people ,and ones least likely to afford it. Further ;it is unlikely that the banks will amend their practices without the combined efforts of the people affected taking legal action.

[JudyKayTee]

Are there any class action suits pending against banks or other lending instituions over outrageous fees charged for overdraft of debit cards ?

here is a letter I sent to my Congressional Representative this weekend :

Sir ,

My daughter has been a frequent victim of what I consider to be usury practices by HSBC regarding unfair fees for the "courtesy " overdraft protection they provide on their debit card student account. This effectively turns her debit card into a high-cost credit card with loan/fee rates that greatly exceed what she could get from a payday loan service ;or frankly from a mob loan shark.

As I research this I find that this is a common consumer complaint across the country that has not been addressed . Abusive overdraft loan practices are costing consumers $17.5 billion in fees per year.

Rep. Carolyn Maloney, D-N.Y., has sponsored legislation that would require banks to notify consumers before imposing overdraft fees, similar to fee notifications required at ATMs for cash withdrawals(H.R. 946, "The Consumer Overdraft Protection Fair Practices Act." ).
H.R. 946: Consumer Overdraft Protection Fair Practices Act (GovTrack.us)

I believe that should be a minimum amount of protection a user of the bank services should be entitled to . Additionally I believe a debit card applicant should have the option to waive overdraft protection .It would be much better for them to be refused at the point of purchase than to pay $35-$40 dollars for a McDonalds cheeseburger.

I urge you to co-sponsor this legislation and do what you can to get H.R.946 passed and signed into law.

.................................................. ...................................
There is no equivalent legislation the the US Senate at this time. While Congress concentrates on the sub-prime mortage problem it appears that they are neglecting an abuse by the banks that probably affects more people ,and ones least likely to afford it. Further ;it is unlikely that the banks will amend their practices without the combined efforts of the people affected taking legal action.

I cannot speak for all banks, certainly, but I have no overdraft/over limit privileges on my credit cards. I had a choice (yes or no) and chose no. Same with checking account.

[Curlyben]

We, in the UK, are currently challenging the banks on their massive profits generated from the charges levied on overdrafts and other "services".
Overall these charges account for around £1 Billion per bank in pure profit a year!!

At present the case is being heard in the High Court where the Office of Fair Trading (OFT) are conducting a Test Case against 7 banks and a Building Society. This has been going on for over a year now and is likely to drag on into the House of Lords, the highest UK court.

Check my signature for further information on this - Legal Beagles - Consumer Rights Forum - The Site that Cares

[ScottGem]

I'm curious, what are the charges? For Citibank, I had to apply for a overdraft credit line at 18% APR. Granted that is a high rate in today's market, but the amount of interest is a lot less than fees for bouncing a payment.

[tomder55]

Thanks Judy ,

This was for a debit card and not a credit card . Consumers including my daughter are not offered this as an option.

This link explains it better than I do
Debit card overdraft fees hit record highs - USATODAY.com



Checks or charges are debited in an order determined by the bank rather than the order in which they are mader ;so banks generally debit the largest pending transaction first. If that transaction overdraws the account, any other smaller transactions made will result in overdrafts as well, even if they predated the larger one. Effectively then;even if the student is responsible and keeps proper ledger ,that student could get caught in this scam because the banks don't pay the transactions in a FIFO (first in first out) manner .

[lmangileri]

I know exactly what you're saying. It's ridiculous. At my bank they didn't ask, just gave me the overdraft protection and I would prefer not to have it but apparently all their checking accounts have it. So like you said, I can go to McDonald's drive through and spend $3 and end up being $38 in the hole by the end of the day. I would much rather not be able to use the card when there are no funds available because once in a while I forget to write something down in my check register. An easy way to get around this in the meantime would be to have your daughter carry cash.

[tomder55]

I'm curious, what are the charges? For Citibank, I had to apply for a overdraft credit line at 18% APR. Granted that is a high rate in today's market, but the amount of interest is a lot less than fees for bouncing a payment

She has been hit a half dozen times for small dollar overdrafts... fees of $35 /transaction. For a college student with a part time job it is the equivalent of handing over a weeks pay for, as I said ,a Mickey D's burger or a couple of dollars of gas for her car.

[lmangileri]

Oh, I have another idea. One of the banks that I went to I had a checking and savings account and if I would go negative in my checking account it would pull out of my savings account in $100 increments.

[tomder55]

Yes ; I have deposited extra money into her account with the understanding that it would not be used.
But the bigger problem is the unresponsiveness of the bank itself . I have I think a little leverage because of my various accounts and have threatened to move them elsewhere. Still ;I believe if affected consumers could join in a class action suit the banks would likely change their practice even before legislation is passes (if ever).

[lmangileri]

I don't think they realize that they're efforts to make money by charging overdraft fees like that will only eventually hurt them because people will start to bank elsewhere. I closed my account at the bank that did that that didn't even send me any notifications

[ScottGem]

Ok, I think I misunderstood the original question. There are two issues here; overdraft charges and overdraft protection. Banks do charge hefty fees if you overdrawn an account. That's basically because it costs them a good amount to deal with the processing of such. But banks, increasingly are seeing profit margins shrink on other services and these fees are are starting to make up a greater share of their profits.

Then there is overdraft protection. This is, essentially, a revolving line of credit. If a payment is presented to the bank (either by a check or debit) and there is insufficient funds, the overage is charged against the line of credit and interest charges accrue.

Now, with my account, if money is transferred from my line of credit, I have until end of business that day to transfer money into my account before interest is charged. Even if I don't cover the overdraft, the amount of interest charged is WAY less then the fees I would incur from insufficient funds. I recommend that everyone have some overdraft protection.

With electronic banking the way it is, its becoming a lot harder to make such mistakes. Chase has a commercial showing a woman hanging on a cliff face and getting a cell phone call that her balance was getting low so she transfers money from savings to cover. While a bit facetious, the technology is there and many banks offer such a service.

So, I don't have a lot of sympathy for someone who isn't aware of what their balance is (I check mine almost daily) and gets caught with overdraft charges.

[lmangileri]

Then there is overdraft protection. This is, essentially, a revolving line of credit. If a payment is presented to the bank (either by a check or debit) and there is insufficient funds, the overage is charged against the line of credit and interest charges accrue.

I think it really depends on what bank you're at because the overdraft protection at my bank is the process of charging overdraft fees. They don't offer you a line of credit. I've asked.

[tomder55]

We looked at Chase over the weekend as a possible alternative .

The number of people getting nailed by this indicates to me that the practice is deceptive . It's really hard to believe that consumers are getting nailed for billions of dollars in fees and all of them are sloppy in their book keeping . As I said ;the banks admit that they don't process the transactions in FIFO. They think they are doing the consumer a favor for doing so. They are wrong.

The technology is also there to stop a debit card transaction at the point of purchase.

[Curlyben]

Too true Tom, but why would the banks want to implement that when they can engage the money making debt spiral?

As the UK banks have found that their charges are now subject to fairness regulations, they too are increasing the rates for authorised overdrafts from single figures to upwards of 20%.

This is likely to hit a lot more people harder then the charges ever did!

[tomder55]

That was a good point that I did not consider . However if that is the result then it would put them in line with revolving credit cards that also have 20% interest charges .

As it stands now ,as I mentioned ;the consumer could get a better deal from the local mobster on the corner .

[JudyKayTee]

Thanks Judy ,

This was for a debit card and not a credit card . Consumers including my daughter are not offered this as an option. .

Mine is both, can be used either as debit or credit. I just pulled out the papers. They don't honor anything over the credit line or in excess of what is in that particular checking account.

At least that's how I read it.

[Curlyben]

Nice site ! Does LegalBeagles deal exclusively with UK consumer advocacy ?

On the whole yes, as we are UK based, but always looking out for other financial injustices.

[johnwayneH]

Dealing with bank fees are the one thing most people hope to be able to stay away from, although banks and credit unions use these as a huge source of immediate cash. Banks increase fees to get some instant cash. The banking industry uses fees for one of the largest sources of revenue there is. As the rules for fees on charge cards and other things get more complicated, the costs are increasing. There are some things we all need to know. These things we have to avoid.