Action Items

  • Review your customer agreements and disclosures to ensure that they adequately disclose how your bank charges fees for overdrafts and insufficient funds.
  • Review your customer agreements and ensure that they each contain provisions for arbitration and class action waivers.

Properly Disclose Fees

As we reported in our Client Alert of September 8, 2020, we continue to see banks sued in class action lawsuits regarding overdraft fees on consumer deposit accounts. We currently represent a number of banks in such class actions. We also expect to see a renewed focus on consumer protection issues with the changes occurring in Washington.

Plaintiffs are now focusing on how banks charge fees on overdrafts or insufficient funds. For example, if a bank discloses that it charges a $30 overdraft fee per item and actually charges that $30 fee each time a check is presented and returned, plaintiffs argue that charging the $30 fee multiple times breaches the customer’s contract with the bank.

It is important for bankers to realize that each case will focus on the precise language of their disclosures and agreements. You must clearly describe how your bank charges its overdraft fees and insufficient funds fees. If your bank charges a $30 fee each time the same check is presented, then be careful in drafting that verbiage and say so explicitly. Bankers that have used vendor “form documents” or templates from the Internet have sometimes been surprised by the consequences of having inadequate verbiage in their own agreements.

Maintain Appropriate Contract Provisions

Also, carefully review all of the bank’s customer agreements to ensure that they each include an arbitration provision and a class action waiver provision. We have found that plaintiff class action lawyers will routinely drop a class action if the customer’s agreement contains either provision.

We Can Help You

Please contact us if you have any questions about the adequacy of your disclosures of overdraft fees and insufficient funds fees, and about provisions related to arbitration and class action waivers. We can also help you respond to any demand letter or lawsuit regarding such fees.

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