Banks Continue To Rip Off Customers With Overdraft Fees
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You thought it was all over and that the banks were playing by the rules. The rules said that you had a choice to opt in to the banks overdraft protection plan or not. But some banks found another way to make huge profits from overdraft fees. A year after financial reform we are still having issues with the big banks over fees.
Union Bank of California is facing a class action lawsuit over illegal overdraft fees. It is alleged that the bank runs a computer program that re-sequences the customers’ daily transactions. For example, if a customer had a transaction at 10 am for $5, another at 11am for $15 and a third transaction at 2pm for $120. The bank would process the largest transaction first. Then the second largest and so on. Now If the customer had only $50 in the account, there would be three overdraft charges at $35 each.
This should not happen. Transactions should be processed as they occur. The earliest transaction first. In our example, there would be only one overdraft fee. This would occur at the third transaction. There was a extra $70 that the bank made by re-sequencing.
How to protect yourself.
1. Check you bank balance at least once each day.
2. Check you bank statements and report any suspicious entries immediately.
Banks try to defend this practice by saying that large transactions are generally for important things, for example, mortgages, rent payment and car notes. This just doesn’t make sense.
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1 comment August 8th, 2011
