Umpqua Bank of Portland is facing legal lawsuit investigation again after settling overdraft fee lawsuit a few years back. The Umpqua Bank is among the several banks which are under investigation for the deceptive practice of overdraft fee. In the year 2014, Umpqua Bank resolved a class action lawsuit settlement of $2.9 million. It was for resolving the allegations that the bank changed the order in which the debit card transactions were authorized in a way that ultimately doubled up the overall number of overdraft fees that was being collected by the bank. The bank was also accused of regrouping the overall transactions which were carried on different days just before arranging them in the order of highest to lowest amount of dollar.
The Umpqua Bank was not alone in the accusation for manipulating the transactions in an order of highest to lowest amount of dollar for raking in more overdraft fees. According to the Umpqua Bank, all of the postings regarding their transactions were carried on legally. However, the accusers alleged that the transaction reordering process was never disclosed on behalf of the bank. The bank not even disclosed their outline in which they charged the overdraft fees. This resulted in an unethical practice of gathering overdraft fees.
Arranging the transaction from higher to lower
According to a report by the New York Times, by posting all the transactions from higher to lower order, a financial institution or a credit union can make enough money by charging an average amount of overdraft fee of 35 dollars. The overdraft fee is charged by the financial institutions on a number of small transactions instead of just one huge amount of transaction. This is because, with small number of transactions, the institutions will be able to gather more number of overdraft fees. Although reordering the post of transactions is not illegal, various accusers have alleged that the banks and credit unions never disclosed the outline that the transactions were going to be processed in a different order, than they occurred in actual.
Lawsuit settlements of overdraft fee
The number of customers who have paid a huge number of overdraft fees in a year are evidently the ones who are of the habit of living paycheck to paycheck. When someone gets charged with a single overdraft fee, it might feel like a sudden shock. However, when you get charged with more than one in a row, you will feel like getting hit by a bamboo stick over and over again. It is a very thing to suddenly improve your financial status when you are already in the phase of struggle. It might feel like a nightmare when you get piled up with forced overdraft fees in such situations.
It is evident from the history of the financial institutions that whenever they face a lawsuit for overdraft fee, they prefer settling down the allegations with settlement amount. This is because they want to avoid the extra expense and uncertainty of visiting the court every month.
Change of law for overdraft fee protection
The Federal Reserve changed all the laws of overdraft protection in the year 2010. Earlier, all the customer of the financial institutions was opted in automatically for the overdraft protection programs. But, after the change of law, the customers are required to choose for receiving the overdraft fee protection regarding withdrawals from ATM and debit card transactions. This implies that in case you do not choose overdraft protection, your purchase or transaction might get declined by the bank due to lack of required funds in your account. As said by Nerd Wallet, any type of automatic checks or bill payments does not fall under the optional coverage of overdraft protection. It might still lead to charging of overdraft fees when there is an insufficient fund in the account to complete the transaction. The overdraft fees need to have a clear outline on the basis of which they will be charging the customers. Due to the lack of a clear outline, the financial institutions are on the verge of facing lawsuits one by one.
With years of lawsuit action against the banks for reordering of the transactions, many of them have decided to adopt the arrangement of lower amount of transaction to higher amount of transaction. This will also help in mitigating all the pressure on the customers. According to a recent report, the financial institutions that began with their new system of low to high sequencing of transaction are Ally Bank, U.S. Bank, Citi Bank and Key Bank to name a few.
For any kind of assistance regarding overdraft fees, contact Shamis & Gentile, P.A.
After Years Of Settlement, Umpqua Bank Of Portland Under Investigation Once More For Overdraft Fee Lawsuit
What is an overdraft fee lawsuit?
Overdraft fee is the money charged by any financial institution like a bank or credit union when a withdrawal from an account becomes more than the available balance in that account. The financial institution will charge such a fee to cover the cost of the transaction. Overdraft fee varies from bank to bank and is incurred for each and every transaction going over the available account balance. When any financial institution engages in deceptive overdraft practices, lawsuit can be charged against it which is called the overdraft fee lawsuit. In such a case the institution is charged debiting customers’ account from the largest to the smallest for the purpose of maximizing the number of times they can charge the customers with overdraft fees.
What happened with Umpqua in the past?
Umpqua bank of Portland, Ore, comes under investigation for potentially deceptive overdraft fee practices. This bank is known to have already settled an overdraft fee lawsuit in 2014 and is again in the queue with various other institutions as well. The bank then agreed to a 2.9 million class action lawsuit settlement to evade the allegations.
Charges against Umpqua bank
The bank was charged of reordering transactions that were made on different dates before placing them all from highest to lowest dollar amount in order to bring in more overdraft fees. According to New York Times’ report, by this reordering, an average of $35 overdraft fee can be charged on several small transactions instead of one overdraft fee for more expensive purchase. Though reordering transactions is not illegal and Umpqua insisted that their posting of transactions was a legal operation, petitioners charged that the regrouping of transactions was never disclosed in the outline published by the bank regarding overdraft fees resulting in faulty and unfair overdraft practices.
How does overdraft fee affect the customers?
Overdraft fees become a real burden to customers who live on a day to day income. While it becomes really difficult to bear with even one overdraft fee, charging several can bring you down to disaster. It feels extremely difficult to cope up financially when you are actually struggling for day to day life and then overdraft fees force you to come up with even more and more money.
Settlement of overdraft fee lawsuit
Time stands testimony to the fact that any financial institution prefers settling any overdraft fee lawsuit as early as they can in order to avoid wastage of time, money and to evade the uncertainty of court transactions. This was exactly done by the Umpqua.
According to Pew Charitable Trusts, many banks have started sequencing the transactions from low to high. Some examples are Citibank, Ally bank, US bank and Key bank. After years of facing lawsuits regarding the regrouping of transactions, these financial institutions have finally resorted to a low transaction amount to a high transaction amount to evade the pressure on customers.
Changes in Overdraft fee protection laws
The Federal Reserve changed the laws of governing overdraft protection in 2010. According to the new law, the customer has to choose to receive overdraft protection for ATM withdrawals and point-of-purchase debit card transactions. There remains no need to automatically opt in every customer to overdraft protection programs. This simply means that if you do not choose an overdraft protection option, your purchase will just be declined if your account doesn’t have sufficient funds.
However, the Nerd wallet says that any automatic bill or check payment is not covered under the optional choice. Hence, you may be charged of an overdraft fee in such cases if your account doesn’t have enough funds to cover the transactions.
Customers’ initiatives for overdraft fee protection
In order to avoid any risk of overdraft fee, it is always advisable that you do not opt for the overdraft protection for your ATM withdrawals and debit card transactions. It is better to get your transaction declined instantly rather than getting a huge overdraft fee later. If anyhow you are charged an overdraft fee or NSF fee by your bank or credit union and you find it unfair for any reason, you have to opt for a lawsuit by approaching an overdraft fee attorney immediately. In order to accurately investigate overdraft fee claims, you may be required to disclose your bank account details and statements to the overdraft fee attorney. But make sure you visit an authentic and reputed attorney who will keep your bank information private and confidential.