M&S is investigating banks who illegally manipulate customer debit card transactions with the express purpose of overdrafting the account in order to collect fees for overdraft protection. The Federal Reserve attempted to address this longstanding problem last year with new a regulation which made overdraft protection an ‘opt-in’ rather than ‘opt-out’ service.
Despite this change overdraft charges remain an important revenue stream for many banks and a debilitating cost to many struggling Americans. According to the Consumer Federation of America who just released a report on overdraft rates, overdraft fees can range from $33-37 per transaction and some banks permit up to ten overdraft transactions per day costing the consumer up to $370.
In order to maximize the number of customers who overdraft their account many banks process the largest transactions first. This forces the customers’ bank account below their limit faster and increases the number of transactions that exceed their balance, for which they can be charged. In addition to these initial overdraft charges many banks impose additional fees if the initial overdraft charge is not paid back immediately; secondary charges can begin as early as a few days after the initial underfunded transaction.
If the money provided to cover a purchase is computed as a loan, the Annual Percentage Rate (APR) would be hundreds if not thousands percent interest, terms that would otherwise be considered usurious. The three worst offenders, according to the report issued by the Consumer Federation of America, are Fifth Third Bank (3,259% APR), RBS Citizens (2,799% APR), and PNC Bank (2,574% APR).
If you have overdraft protection and have been charged excessive overdraft fees by the banks listed above or any other provider, or if you believe your bank has intentionally reordered your purchase to overdraft your account please contact us.