One banking practice that has become the subject of class action suits involves banks re-sequencing transactions from highest to lowest in order to collect additional overdraft fees.
Imagine you have $100 in your bank account. You go to the convenience store in the morning and purchase a quick breakfast for you and a friend for $10 with your debit card. Shortly afterward, you spend $5 at a supermarket, and $5 at a gas station, both on your debit card. Later that day, you treat yourself to something for $50 with the debit card. Finally, at the end of the day, you pay your $70 phone bill online with your debit card. All this totals $140.
If your bank’s overdraft fee is $25, you’d expect to have one $25 overdraft for the $70 phone bill since that charge occurred last-in-time and brought your purchases over the $100 limit. In many cases, you would have been in for a costly surprise! For many years, banks would routinely re-sequence transactions from highest to lowest in order to increase their total fees. As shown in the chart below, the bank would re-sequence the transactions so that the $70 phone bill payment is processed first, and then the $50 store purchase (placing you over the limit), followed by the $10 breakfast, and then finally the $5 transactions at the supermarket and gas station. Voila! The bank is now able to charge you for four overdrafts instead of one, bringing the total overdraft fees from $25 to $100.
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Re-Sequenced Order |
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Finkelstein Thompson LLP has been plaintiffs’ counsel in many suits challenging this practice as a breach of contract and a violation of states’ deceptive practices statutes. In this capacity, Finkelstein Thompson has helped obtain over $30 million in proposed settlement funds against national and regional banks, the majority of which will go back in the hands of the bank customers who paid these overdraft fees.
