When it comes to overdraft fees and opt-in debit practices, credit unions in Washington and Oregon were being reminded this week by the Northwest Credit Union Association about transparency and policy consistency following a new class action suit brought against a Portland, Ore., bank.
In an e-mailed bulletin, the trade group stressed that both banks and CUs must choose a method by which they process debit card transactions and that in the case against Umpqua Bank, the bank chose a practice "re-ordering them from highest to lowest dollar amount."
That practice triggered the class action suit alleging the bank unfairly was intentionally depleting accounts by prioritizing the largest transactions and creating overdraft fees as a result.
The Umpqua method "justified by assuring that consumers' most important payments are paid first is not uncommon even though it uses low-balance accounts to go negative more quickly," noted the NWCUA.
Other financial institutions "process transactions in the order received, others in real-time and others the smallest transaction first," the association said.
"No matter which method is selected," said NWCUA President/CEO John Annaloro, "someone is likely to complain. The key is to make sure members have easy access to all the necessary information and that fee assessments are done in a manner that is consistent and fair."
For CUs, the association said, the issue is partially covered by Reg E since as of July 2010 CUs were no longer allowed to charge an overdraft fee on non-recurring debit card transactions unless members opted in. "So," continued the NWCUA, "there are now two kinds of members: those who have opted in and have transactions in excess of their balances approved and subsequently pay a fee, and those who have opted out either have transactions in excess of their balances declined, or in certain circumstances, due to the electronic payments system, still get those transactions approved and pay no fee."
In the member bulletin, the trade group noted that Umpqua is not alone facing the overcharge allegations. Wells Fargo customers in California were awarded $203 million in damages in August 2010 related to the bank's overdraft fee practices.
"Bank of Hawaii, Bank of Oklahoma, Union Bank and Westamerica have also repaid millions of dollars in overdraft fees in recent years, while Bank of America, Citibank and Wells Fargo have all adopted more consumer-friendly overdraft fee policies," the NWCUA said.
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