Overdraft and Bank Fee Settlements Explained

Overdraft and bank fee settlements refund customers who were charged overdraft, NSF or other account fees in ways a lawsuit says broke the account agreement or the law. If you had a checking account at a bank or credit union that settled and you paid the disputed fees during the class period, you will often be paid automatically, either as a credit to your account or by check if you have closed it.

What these lawsuits challenge

Most overdraft cases are breach of contract claims, arguing the bank charged fees in ways its own account agreement did not clearly allow. Common practices at issue include:

• ✓Authorize positive, settle negative: charging an overdraft fee on a debit card purchase that was approved when the account had enough money but settled later when the balance was lower.
• ✓Multiple fees on one item: charging a new NSF fee each time a merchant resubmitted the same rejected payment.
• ✓Reordering transactions: posting the largest debits first to increase the number of overdrafts.
• ✓Opt-in problems: federal rules require customers to opt in before banks can charge overdraft fees on ATM and one-time debit card transactions, and some suits challenge how that consent was obtained.
• ✓Other fees: out-of-network ATM fees, balance inquiry fees, and fees on transfers between accounts.

Who qualifies

The class is usually defined as account holders who were charged a specific type of fee during a set period. Because the bank has full records of every fee charged, the administrator can usually identify class members without any action from you.

Why many pay automatically

Since the bank knows exactly who paid which fees, many overdraft settlements do not use a claim form at all. Payments are calculated from the bank's data and distributed automatically:

• ✓Current customers usually receive a credit to their account.
• ✓Former customers usually receive a check mailed to their last known address.

Our guide on automatic payment vs claim form settlements explains the difference. Some bank settlements still require a claim, so read the notice.

How much you might get

Payments are usually proportional to the disputed fees you paid. Someone who was charged many fees during the class period will typically receive more than someone charged once. Settlements generally pay a portion of the fees rather than all of them, after attorneys' fees and administration costs. Some also forgive unpaid fees on closed accounts.

What to do now

1. 1Make a list of every bank and credit union you have had accounts with, including closed ones.
2. 2Check open bank customer settlements for those names.
3. 3If a settlement needs a claim form, file before the deadline.
4. 4If payment is automatic, make sure the administrator has your current mailing address.
5. 5Cash any check promptly, since settlement checks usually expire.

Banks vs credit unions

Both banks and credit unions face these cases. Large national banks have settled overdraft suits, but many recent settlements involve community banks and credit unions, where the class may be a few thousand members. Smaller cases get little attention, so you are less likely to hear about them unless you check.

How to tell if you paid the disputed fees

Look through old statements for overdraft or NSF fees, especially several fees on the same day or repeat fees for the same merchant. You do not need to prove this to be paid in an automatic settlement, but it helps you judge whether a notice applies to you and whether the amount you receive looks reasonable.

If you think you were left out of an automatic distribution, contact the administrator named in the notice. Give the account holder name, the last four digits of the account if asked, and your current address. Never share a full account number or online banking password with anyone claiming to process a settlement.

Smaller banks and credit unions settle these cases often, and the notices are easy to mistake for junk mail. Add your current and past banks to SettleScout, and it will alert you when a matching fee settlement appears and remind you of any deadline.