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FDAzar > Unfair Bank Overdraft Fees Laws, Regulations and Lawsuits


“I believe that banking institutions are more dangerous to our liberties than standing armies.”

–Thomas Jefferson

Anyone who was improperly charged an overdraft fee may have a claim against their bank. Improper overdraft fees are often charged when a debit card is used for regular, everyday purchases. These improper overdraft fees may cause customers’ accounts to show a negative balance, which can result in additional overdraft fees and other charges. IF YOU BELIEVE YOU HAVE BEEN UNFAIRLY CHARGED OVERDRAFT FEES BY ANY BANK, CONTACT FDAZAR IMMEDIATELY FOR A FREE CONSULTATION.


Overdraft fees occur when a customer makes a purchase and there are insufficient funds available to cover this transaction in his or her checking account. An overdrawn account can occur because of a bounced check, debit card purchase, or ATM withdrawal. If you have overdraft protection included with your account, your bank can process the overdrawn transaction and charge you a fee instead of rejecting it. Overdraft fees have been a substantial source of revenue for banks, and today those numbers are only growing. Recent reports from the Federal Consumer Financial Protection Bureau (“CFPB”) show that a broad investigation has been launched regarding bank overdraft practices and procedures due to its concern that the growing cost of overdraft practices could place banking customers at unnecessary risk.

Overdraft fees have been criticized for targeting those who live pay-to-pay check. A Pew study found that consumers earning less than $30,000 a year were twice more likely to suffer overdraft fees than those who make more. Therefore, customers who feel they need overdraft protection to ensure their debit cards or checks are not declined when they purchase necessary goods such as food or gas or pay their utility bills are most likely to end up incurring the most fees.

Prior to 2010, most banks automatically enrolled all customers in overdraft coverage unless the customer opted out of overdraft protection. These banks automatically processed transactions when customers had insufficient funds and charged a fee of around $35 for each of these transactions.

To reign in bank abuses of automatic enrollment in overdraft protection, the Federal Reserve Board passed Regulation E in 2010. Regulation E declared that the default setting for an account must be a rejection of the transaction by the bank if the account has insufficient funds unless a customer affirmatively opts in to an overdraft protection program. Regulation E also requires that banks allow customers to opt in or opt out of overdraft protection at any time. So when signing up for a new account, there are generally three options available to customers regarding overdrafts for a checking account:

1. Do not opt into any plan and have the transaction immediately rejected by the merchant if the account has insufficient funds. This is the default setting when an account is opened, and no fee is incurred by a rejection of the transaction.
2. Opt into overdraft coverage and pay an overdraft fee, usually around $35, when the bank processes the transaction resulting in a negative account balance.
3. Opt into an “Overdraft Protection” plan in which the bank processes the transaction and transfers funds from a linked account or credit card to the checking account for a fee of $10-$12. To use this “automatic funds transfer option,” the customer must have sufficient money in their savings account or qualify for a line of credit.

Regulation E only applies to one-time debit card transactions, not recurring transactions. One-time transactions are unique transactions not scheduled to regularly re-occur. Examples of one-time transactions include purchases such as clothing, restaurants, a ride with Uber or Lyft or travel. Recurring transactions, on the other hand, are scheduled to regularly re-occur. Examples of recurring transactions include utility bills, cell phone bills, car loans, gym memberships, and streaming content service memberships like Netflix or Hulu.


Unfortunately, despite these protections, banks are still charging improper overdraft fees. For example, Bank of America and Wells Fargo have been sued for charging consumers improper overdraft fee on one time transactions with merchants such as:

• Ticketmaster

• Groupon

• Ride share services, such as Uber and Lyft

• Airfare, hotel bookings, and other travel plans

• Gas stations

• Restaurants

• Whole Foods, Kroger and other supermarkets

• Food delivery services, such as GrubHub

• Target, Bed Bath & Beyond and other retailers

• Macy’s and other department stores

• Ulta, Sephora and other beauty stores

• Lululemon, Athleta and Under Armour

• Famous Footwear, Finish Line, Footlocker, Aldo and other shoe stores

• eBay

• Overstock

• Wayfair

• Etsy

• Shutterfly

In addition to improperly charging overdraft fees for one-time transactions, banks are employing deceptive practices such as marketing campaigns, high pressure sales tactics and a lack of transparency to convince customers to opt into overdraft coverage. A Pew study found that more than half of customers who were charged overdraft fees in 2011 did not know they had opted into overdraft protection, resulting in an estimated $16 billion in overdraft fees that year. And in the following year, banks took in approximately $32 billion in overdraft-related fees.


Pursuing an individual claim against a large company often costs more than you would ever expect to recover. However, what happened to you may be happening to hundreds or thousands of other people. If, after speaking with you in detail, our class action attorneys discover that the wrong done to you is pervasive and widespread, they may ask you to consider joining with others in a similar situation to pursue your claim as a class action. If successful, we can help customers get back the improper overdraft fees charged to their accounts. Additionally, the court could order the banks to change their practices and prevent them from continuing these illegal and deceptive practices.

If you believe you have been unfairly charged overdraft fees by any bank, let us help you.


Franklin D. Azar & Associates is well known in the class action community. For over 30 years, our attorneys have protected the rights of individuals who have been taken advantage of by big corporations and during that time, has secured over $1.5 billion in compensation – including over $750 million from Walmart in a wage and hour dispute that spanned approximately 26 states. FDAzar has been and is involved in mass tort and class actions against other large corporations like Toyota, Hewlett Packard, British Petroleum, drug manufacturers, medical device manufacturers, and 401k providers. Our class action department is staffed with experienced and knowledgeable attorneys who focus on litigating large, complex cases.

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