Removing Unfair Bank Overdraft Charges and Penalty Charges. What You Can Do.

Unfair Bank Charges: He was charged a $35.00 fee twice over a $4.00 overdraft. A commenter asks “What can I do?” when the bank purposely delays posting fees paid.

JANUARY, 2010 UPDATE

Our posts on ‘What you can do about bank overdraft charges.’ generated so much interest that I updated them here – including the option for FREE overdraft protection.

I overdrew my acct by $4.00. The very next day I deposited 50.00 to cover the overdraft and no fees were posted to my acct yet. They waited until my acct had $3.21 left in it, then charged me a 10.00 overdraft fee, which put my acct in negative again. Now I get hit with a 35.00 fee twice. Then an extended fee because I didn’t pay their 80.00$ within 2 days. Unfortunately I refuse to pay 115.00 in overdraft fees for a 7.00 overdraft. This doesn’t even seem legal to me. Is there anything I can do. I am a single dad with a paycheck to paycheck job and I need this acct. What can I do?

I sent the question to Rights Radio financial guru Joe Stallard.  He suggests:

I would suggest that he call customer service at the bank. Use an approach along the lines of “I don’t understand what’s going on…can you help me?” No confrontation. No arguing. No outrage at what the bank has done. That won’t accomplish anything – the “can you help me” approach almost always works. It allows the bank (the customer service agent) to be the hero and do a good deed. Most of the customer service reps have the authority to refund the overdraft charges and the banks are not looking to alienate too many customers.

Yes, the bank caused the problem. Yes, the bank held off on crediting the deposit in a timely fashion (waiting for further overdrafts to occur). It’s a common tactic, and it’s flat out wrong. Nothing anyone can do about it other than trying the above approach – I’ve seen it work time after time. Getting angry and “expressing” your outrage usually won’t get your money back. Chalk it up as a lesson learned the hard way (what…you mean the bank isn’t my friend after all?).

Some of the bigger banks don’t do this. Their technology is up-to-date and deposits are credited in “real time” – right when they’re made. After he tries the above, if he gets the fees (or part of the fees) credited back, find a bank that operates in real-time and move the account.  ~ Joe Stallard

Author of How to Repair Your Credit Score, Joe Stallard provides financial coaching at RightsUniversity.com. Call 786.693.4223 for an appointment.

Change the Law to Cap the Overdraft Fees Banks Can Charge? A Commenter Asks:

Is there a way to get a law passed that will have a cap on the amount a bank can charge for service fees.  They should have the right to charge only up to the face amount of the transaction or double it for transactions under 10.00 not a 35.00 fee for a small transaction..  THAT SHOULD BE ILLEGAL.  Why can’t someone pass this law asap.  I was charged 175.00 for 5 transactions that were all near 1.00.  I also made a deposit the same night to cover them but my deposit didn’t get posted till the next day.  That way the bank had the opportunity to charge me 175.00 for 6.00 worth of transactions.  Can someone please help and explain this to me.

Rights Radio forensic economist/author Dr. David Goldenberg responds:

The answer to the inquiry below is yes, in theory but probably not in practice. The desired law would have to be enacted by Congress because it often involves interstate commerce.  The banking industry has a strong lobby and would fight this added regulation for several reasons.

First, it would oppose any additional regulation as a matter of principle. Second, it would oppose such a law as depressing its profits at a time when profits are desperately needed. Third, it would oppose any law with absolute numerical cap since costs change over time.  The proposal new law would have to set the cap in relative terms.  Something along the following lines might work in theory: no bank may charge a penalty or late fee in excess of the face value of the transaction.  However, that would open the door to a wide range of fees for the same “offense.” Then while the fee for $1 late check payment would be no more than $1 but it could rise to $1,000 for a $1,000 check and that’s clearly far in excess of the cost of processing such a check.

Fourth, it would oppose a cap of the sort imposed as discriminating against the majority of its customers.  A bank’s cost of handling such transactions doesn’t change much if at all with the size of the transaction so a relative cap would unfairly/unjustly penalize people making larger transactions.

The inquirer could write to her/his senators and congressional representatives for further suggestions.  A polite response will appear in due course.  That response probably will offer a series of reasons for not going further.  Those excuses may include the items mentioned above in addition to higher priority commitments.  It almost certainly won’t mention that historically there’s only about 1 chance in a million of any particular proposed legislation being passed and then one has to deal with the problems of funding its implementation and enforcement. Nor will it mention the fact that if a politician proposed such legislation s/he is likely to sacrifice it in committee for something s/he deems more important to her/his career. ~ Dr. David Goldenberg.

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To truth in overdraft charges!

More about outrageous bank overdraft charges.

Dr. Joyce Starr

Comments

  1. Marineta says

    Is there a way to get a law passed that will have a cap on the amount a bank can charge for service fees. They should have the right to charge only up to the face amount of the transaction or double it for transactions under 10.00 not a 35.00 fee for a small transaction.. THAT SHOULD BE ILLEGAL. Why can’t someone pass this law asap. I was charged 175.00 for 5 transactions that were all near 1.00. I also made a deposit the same night to cover them but my deposit didn’t get posted till the next day. That way the bank had the opportunity to charge me 175.00 for 6.00 worth of transactions. Can someone please help and explain this to me.

    • says

      Hi Marienta,

      Citizens across the nation share your frustration with bank overdraft charges. I asked Dr. David Goldenberg to respond to your question. He did so within the body of the article.

  2. Patricia says

    Reading this is it true banks can charge anything they want for overdraft/insufficient funds? They can charge as many in one day? I am in California and my bank charges $33 per. I am a disabled senior just trying to survive. Help.

    • says

      Dear Patricia,

      Dr. David Goldenberg responds to your question below:

      Banks are regulated. You can ask your bank to identify the specific portions of the state/federal laws/regulations governing his/her firm’s ability to charge fees for overdrafts. Banks can and almost always will charge a fee for each and every overdraft, whether it’s one a year or fifty in a day. Banks can also refuse to do business with those who run up too many overdrafts, forcing the borrower to pay bills in cash or by postal money orders.

  3. gina says

    i was charged $175($35×5) over draft fee after purchasing 5x$1 stamps at the post office from the machine. i deposit my paycheck and $200 cash before going to post office and my bank gives me $100 credit right away so i thought i was safe to use my debt card but i was not credited till next day and i was charged $35 for each stamp i purchased. i usually leave at least $50 balance in my checking account for just in case but i was thinking about closing this account because there is no wachovia near my house and it became a hassle driving around and looking for one… and i was out of work for few months so there was nothing going into that account for few months anyway…

    someone advised me to call them but i am too stressed out over my financial situation right now and i am just about to “lose it” :( so i am afraid to hear what they have to say… i wish #1 they would have declined the transaction… i do not understand why i was able to make purchase if i didnt have the money to cover the charge and #2 i wish they would have credit my account right away as usual for first $100…

    i am thankful that i was able to go back to work right away but it seem like i will never be able to dig myself out of this depressing financial situation i am in… there is always something!!! :(

    • Ben says

      I’m not sure if all banks do the same but Wachovia deducts all debit card purchases immediately from your account. Then they place them on hold, so, if you have a negative posted balance, then even though the money has already been deducted from your account and each time an item is taken off hold, they will charge you again for these items, plus a 35 dollar overdraft fee each. One 3 dollar overdraft cost me 105 dollars. Plus, even though you put money in to cover all the overdrafts, you will have to again pay the remaining items that have been deducted from you account already. Basically there were two items on hold, so you pay the face value of the remaining 2 items even though you have already paid them once. Even if you catch it the same day, if you deposit the money after 2 PM, it won’t be posted until the next day.

      After spending over an hour on the phone with Wachovia, the answer was, That is the way we do business, and there is nothing you can do about it.

      • Gwen says

        A similar thing happened with my Wachovia account. I ended up having 7 items with a $35.00 “fee.” Even the person at the bank, who I actually went down to see face to face, couldn’t look me straight in the eye and say that what they were doing was right. All she could say is that this is the way it has been as long as she’s been in the banking business. What are our alternatives? Are credit unions better?

  4. c had says

    After the nice talk gets you nowhere with the bank, what do you do when they sue you for the money and/or
    put the unfair amount on your credit? How do you win against them when they do not change their mind
    and they do what banks do and ruin your credit? Talking nice doesn’t work at most banks in the world!

  5. Louis says

    It seems that you can’t win, with the banks (Financial institutions). If you overdraft $1 dollar, a $10 dollar fee would hurt and teach you a lesson. but a $33 dollar fee is Financial Rape. I got slapped with $132 for 4 small transactions. Its interesting that the bigger of the transactions always goes through first, therefore putting you in the red faster and the bank makes more money. it happens every time. I understand that part of it its my fault, but the consequences are too much. The penalty does not fit the crime. I am changing my bank based on principal and will be a lot more careful in the future…I have a plan to only pay certain bills electronically, get some cash out for expenses and not to use the ATM Matercard for small transactions because sometimes they don’t show up for a while.

  6. Nick says

    Well I think I’ve got everyone topped. My bank is Citizens Bank, and I posted my mortgage for Friday on Wednesday. When Friday came along my funds were to low for the debit to draw…or so I thought. I didn’t use my card until Saturday thinking that my mortgage company wouldn’t draw the money due to lack of funds. I was wrong. I got a total of 20 overdrafts on Monday from the whole weeks worth of transactions at 39 dollars a whack. I m planning on going to the bank tomorrow to try and fight it, but judging from the testimonies above, I think I m in big trouble. 800 dollars for 100 dollars in transactions…nice…highway robbery!!!!!!!!!!!!

  7. Jane M. says

    I am having the same trouble with Fifth Third Bank. They charge $74.00 per each bounced check and then $8.00 per day. I am raising a son with autism and going to school. I had to stop payment on a check from the last time they messed me up. They let the check go through and have charged me $198.00 so far. I only get a check at the beginning of the month and they will end up getting my disability check again. I went in and was nice about it, met with the bank manager and he said he would check into it and call me. That was 8 days ago. I reported them to the head office and so far haven’t heard anything. I am closing out my account. I won’t have another checking account again. It is a nightmare. I can’t believe banks get by with this stuff. It is horrible.

  8. Ben says

    Under new Federal Reserve Board rules, beginning August 15, your bank must first get your permission to apply its standard overdraft practices to debit card and ATM transactions before you can be charged overdraft fees. The new rules do not cover checks or automatic bill payments that you may have set up for paying your mortgage, rent or utilities.

    Of course, you can opt in, if you don’t mind paying the overdraft fee. Personally I had rather the card be declined. Thirty five dollars interest on a three dollar loan for a couple of days is a little much.

      • Ben says

        Dr. Joyce. I pretty well understand how the banks operate. Seems some folks feel if they have a debit card and checks in their checkbook, they have money. The sad part, as with my significant other, you can’t spend something you don’t have. For her and others, it would be best to keep the cash on hand. When they open their purse or wallet and it is empty, that means you are broke. I personally can tell you at any given time exactly how much money I have down to the penny. If two people are on the same account, sometimes you have a problem. Take care.

  9. Tom C. says

    As a business owner that gets his checks held 10 days for verification, I will be glad to see this law go into affect. I have paid $4, 850 since the first of the year for overdraft charges. I talked to TCF Bank about it, they will not refund any money. If you know a good lawyer in Denver that can help, let me know. I call this excessive fees.

  10. William Porter says

    I too have run into this fee business. Because the bank deliberately posts (1) credits last and (2) debits in decreasing size, they can reap benefit upon benefit. I can’t understand why Congress doesn’t pass some legislation that would control this methodology. It “used to be” that you were only overdrawn if at the end of the day your balance was in the red. They now approve or pay everything and then run the “test” during the night to see how they charge fees. I’m surprised they haven’t looked at the date on checks that come in and try and run the test with them also – ie, did you have the funds available at 7:30 pm on Sunday night when you wrote a check for $87.23 to the power company. It’s a shameful situation but I’ve had absolutely no luck trying to fight or argue with them on this and the customer service people have only limited authority to do anything. We all know that this stuff is processed electronically – I can’t imagine how they justify the amount of the fees. I’ve checked various banks and credit unions and they all (or at least what I’ve found) doing business in the same manner. Think of the groceries that could be bought for each $35 fee. I tried to get them to make a donation to my church in the same amount of the fees they charged me. That certainly didn’t fly. Only lesson – get rich and then you’re not concerned about this. If someone has been successful at getting this overturned please let everyone know. Thanks.

  11. A Cain says

    I am a member of a Credit Union in TN. Credit Unions are not better then banks – only lower NSF charges of $20.00. I looked online on the 11th and was amazed that they have charged me NSF when I was not negative. When I called to dispute these charges CSR had the nerve to say it was my fault for their mistake. They reimbursed me $180.00. How can they do this legally? I was not negative but after 3 $20.00 NSF charges in a row it made me negative which in turn they got more NFS double dipping. I wonder if I should seek a lawyer?

  12. Justine says

    My mother in law is applying for medicaid. In order to get the process going she needs bank statements going back five years. I called the bank and they said it would cost her 6.00 per statement which adds up to 370.00. That’s terrible for a disabled senior citizen to pay to try and get medicaid in New Jersey. Any suggestions? thank you

  13. Dan S. says

    The following is a letter I’ve written to BBB, currently awaiting the response.

    My wife and I have 6 checking accounts with Regions Bank on 26th Street. They include My Mother-in-laws retirement deposit account, our “bills” account, the “play dough” account, 2 business accounts and a self directed IRA retirement account. On March the second my wife made a 500 dollar deposit to what she thought was our bills account but had inadvertently grabbed the wrong deposit slip, with six accounts the possibility of that happening was pretty fair. The following day while checking the accounts she saw the overdrafts, realized her mistake and transferred the funds to the correct account. The overdraft fees came to over one hundred and twenty dollars. I contacted Regions and asked them to waive the fees and explained that the money was in the bank, but had been deposited to the wrong account. If we had written checks with no money to back them up I wouldn’t have a problem with the bank; however between the 6 accounts, there was over 11,000 dollars available to pay the checks. I feel the bank has taken advantage of the mistake, that their business practice is less than ethical and needs to be addressed as well as publicized to prevent them from repeating it again.

  14. Hatti says

    I used my debit card as a credit card. At the time my balance was sufficient to meet the charge easily. The amount of my charge was debited out of my account the same day. When my Insurance payment came due three days later I did not have enough money to cover so it went into overdraft. I have an overdraft allowance of 500.00 so I was not worried. I did not expect to be charged two overdraft fees. One for the credit card charge that they had debited out of my account three days earlier and one for my insurance payment. Is this allowed? My credit union tells me it is their policy. I don’t understand how they can take the money out of my balance to secure the charge and then three days later charge me an overdraft fee!

  15. Joseph S says

    I was charged $35 overdraft for overdrafting by $0.98 then I got a e-mail saying that I had until 13th before they would charge be another $35 for the extended overdraft. Then they charged me on the 10th as my check was direct deposited that day.

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