Unfair Overdraft Fees TD Bank Canada

A number of major banks in the United States have been hit with multi-million dollar lawsuits claiming that they engaged in this sameunfair practice of transaction sorting. Many of these suits have been consolidated in a federal court proceeding in Miami. More than a dozen banks have agreed to multi-million dollar settlements in regard tounfair overdraft fees including the following:

• Bank of America: $410 million
• Citizens Bank: $137 million
• Chase: $110 million
• PNC: $90 million
• TD Bank: $62 million
• US Bancorp: $55 million

While litigation has awarded compensation to aggrieved customers, it has also allowed these practices to be subject to a much higher scrutiny. The Consumer Financial Protection Bureau announced that it would be investigating the overdraft practices of several major banks. In addition to transaction re-ordering, the investigation will also focus on confusing customer communications; misleading marketing materials; and the unfair impact on low-income and younger consumers.

To demonstrate how transaction re-ordering works, assume a customer has $100 in their checking account. Throughout the day, the consumer makes five $20 debits, followed by an $80 transaction at night. If the bank processed the transactions in the order in which they were made, the customer would only be charged one overdraft fees for the $80 debit; however, if the bank processed the $80 transaction first – even though it was made later – the consumer would be charged overdraft fees for four of their $20 transactions, even though they were made earlier. If the bank charges $35 per overdraft fee, this consumer would be charged $140 rather than $35.