Chase's overdraft fee scam ( now resolved but interesting discussion )

Just when I thought banks couldn't get any more sleazy it turns out I'm wrong. Some years ago my mom had opened a checking account with Chase which had "free" $3000 automatic overdraft protection. I'm not sure what the terms were when she originally opened the account, but as things stand at present I'm stunned by what I learned. My mom generally doesn't write checks for more than is in her account. She claims to have used the overdraft only a few times, although I think the terms were different than now. I think for a while the overdraft protection didn't have any fees or finance charges on account of my mom having other large accounts with the bank. Anyway, the problems began in July. Her account started off at around $1200. In early July she went into the hospital for hip replacement surgery. She wrote a bunch of checks to cover bills coming due when she would be hospitalized. The checks totaled roughly $100 more than the total of what she had in her account, plus the pension check she would be getting towards the end of the month. Keep that $100 figure in mind. I'm not sure if she realized she would be short or not, or whether or not she had intended to rely on overdraft protection. In any case, what happened next is beyond belief. Sure, some of the checks obviously needed to be covered by overdraft protection. However, the pension check she would be receiving towards the end of the month would have pretty much wiped out most of the negative balance if not for the exorbitant fees Chase charged.

The odd thing is the July statement never gave any indication of overdraft fees or finance charges, or I can guarantee my mom would have called the bank to find out what the heck was going on. It turns out whatever fees Chase charged made the checking account balance negative the following month, even as my mom thought she was covering all her checks according to her checkbook. Suspiciously, her monthly checking account statements simply had a starting and ending balance of $0, not a negative balance which might have aroused suspicion. I'm sure anyone reading this is starting to get the big picture. On account of whatever fees Chase added in July, it caused the account balance to remain negative despite my mom adding more than enough money to cover the checks she wrote in the subsequent months. End result is every check written since this nonsense started was on overdraft. Even worse, the monthly statements never said what the fees were, what checks they were for, or allowed any other way for us to account for them! From what I've read online some say Chase charges $35 for every check covered by overdraft. Can this possibly be true?

Things may have gone on this way forever except this month my mom received a noticed of a bounced check, apparently because the negative balance in her account exceeded the $3000 protection limit! As roughly as I can determine, over the last seven months the discrepancy between what she thought she had in her account, versus what was actually in it, is close to $3000! For example, according to her checkbook, a deposit of $1500 on February 9 showed an account balance of about $1670. An overdraft account statement ( which they only started sending in October ) from the same date showed a balance of about $1200. Note that the balance on the overdraft statement is similar to the balance on a credit card statement, namely that it shows what is owed, not what you have in the account. So this is close to $3000 in fees and finance charges over this time period. And Chase couldn't even be bothered to break down these fees for us.

Now my next question is obviously going to be how can we get out of this. This in my opinion is so misleading as to warrant a class action lawsuit. I've learned that banks make a large amount of their profits with these types of fees. The part which is misleading and deceiving is to represent what they're doing as a "free" service when it's anything but that. Making it worse is the fact that they don't even notify the customer of any of these fees, thus allowing your account to become more and more negative. We plan to go to the bank this week to straighten it out. I really need any advice anyone can give me. Frankly, I'm so mad right now it's likely I might do something at the bank which will land me in prison if they turn out to be uncooperative.

Also, anyone aware of any class action lawsuits pending for this? This certainly warrants one. Between misrepresenting what they're giving you, and then not informing you of fees, it's easy to dig yourself into a major hole in no time.

Situation resolved - see this post

Re: Chase's overdraft fee scam

That is really disgusting, but with the regulations passed last fall by Congress, yet giving the banks time to make adjustments before they went into effect, you are going to see less and less exceptions and compassionate adjustments being made.

If you haven't already, I would first make sure you look carefully at all the pages of statements going back a year. I doubt in today's environment where all the financial institutions are under close scrutiny that they technically violated the terms of her account. However, if the running bank fees are not shown on the monthly statements of account balance summary, that sounds like a legitimate basis for a "bad faith" claim.

The only recourse people are going to have is to do their banking with smaller "home town" banks, S&L's, credit unions. There is always flexibility for making adjustments, but most of the big banks are not going to show the compassion your mother deserves.

I don't think most people balance their checkbook to the penny on a daily basis, using a program like Quicken, but they should now more than ever. It only takes me a couple minutes to reconcile my actual Quicken balance with monthly statements, and I'm still using Quicken 2001 version.

Re: Chase's overdraft fee scam

Bank of America also likes to screw you with their bounced check fees as well, and there's a class action lawsuit in the works against them (which I'm sure all the "plaintiffs" will get something like $7 each if they win).

My horror story was when they deducted my transactions out of order. Regardless that my $300 purchase was made a full week before 12 other transactions, they deducted the $300 first, and charged me $37 each for 12 transactions = $444 in bounced check fees; instead of charging me a single bounced check fee of $37 for the $300 transaction like they should have (which was overdrawn by $7 mind you).

It's simply big business. They have no soul.

Re: Chase's overdraft fee scam

I never pay any fees, even normal monthly service fees, but I keep my accounts balanced at all times. Writing checks or making debit card purchases with a negative balance is against the law in most jurisdictions so if a bank covers someone's a$$ and charges a fee IMHO its better than being charged with a crime.

Re: Chase's overdraft fee scam

Wow, this sucks. Sometimes they will put ()...example ($1670)...meaning a negative balance. They also will pay the larger checks out first if several are on the same day. For example...if you have $500 in the account and several checks to be paid out on the same day....$400 (house payment) $120 (elect) $60 (water) $50 (cable TV) $ 30 (credit card). They pay out from largest to smallest to increase their fees. In this example they pay the $400...and everything after that gets a $35 fee...4 x $35 = $140.

If they had payed out from smallest to largest...only 1 payment would be subject to a fee (house payment in this example)...so only $35.

You may be able to argue that it was not clear from the monthly statements that there were any problems. Perhaps they might let some fees go.

Re: Chase's overdraft fee scam

I found this class action suit which makes for interesting reading.

I seems for a while banks were offering overdraft protection totally for free to their customers in good standing. This may and most likely was the case with mom. I can't say for certain as she has no statements going back that far. What they may have done in the interim is change terms, and perhaps bury this change of terms on page 41 of some 200 page legalease document they send you which nobody bothers to read ( and most couldn't understand even if they did ). Obviously then most people wouldn't have been aware of any changes, and would continue to assume overdraft worked as before.

Second, even if the terms were changed to allow charging these exorbitant fees, the fact remains that there is absolutely no paperwork indicating what fees were charged and when. Moreover, my mom does in fact balance her checkbook, and never knowingly relies on overdraft. What happened in July was an anomoly. She was in the hospital, had expected to be there for up to the end of the month, and therefore wanted to make sure her bills coming due were covered. I can't say whether she had intended to rely on overdraft that month, or just assumed some checks would not be cashed until later in the month when her pension check was deposited. Nevertheless, it wasn't her intention to start running a negative balance. And despite the fact that she has since maintained a positive balance, at least according to her checkbook, the fees have caused a continual negative balance. Had she known in advance what the fees were, she never would have mailed those checks. And had Chase detailed the fees on her monthly statement, she would have been able to fight them and/or account for them when figuring out her balance in future months. It seems for one slip up amounting to a net deficit of about $100 the end result has been close to $3000 in fees. Moreover, she can't pay her bills now because any checks she writes would be on overdraft, adding yet more fees. So now we face the prospect of having the electric, phone, Internet, etc. shut down in the not too distant future for lack of any means of paying them.

Regardless of whether fees like this are legal ( and they shouldn't be because $30 or $35 or whatever fee they charge doesn't represent the bank's risk here ), the fact remains that to this day we don't know what fees were charged, and when. How can you possibly balance a check book when a bank charges unknown fees? This is way different than the class action suits where banks reordered transactions from highest to lowest in order to extract the most overdraft fees ( another practice which should be illegal ), but at least let customers know what fees they were being charged. What Chase has done here has to be illegal. It's unprecedented to charge fees but not inform the customer how much the fees are, or what they were for. I can guarantee if the monthly statement for July had lines like "Check 2020 $35 overdraft fee" things never would have gotten to this point.

Any advice for when we go to the bank ( maybe Wednesday )? Should I pose as my mom's lawyer, and perhaps record the conversation? And bring along a copy of the class action lawsuit I linked to above just to let the bank personel know I'm aware of what's going on? The plan for now it to ask for a detail of all fees charged since July, and for a waiver of all those fees ( although it might be acceptable to levy finance charges only for the short time in July when the checking account balance was negative as that was a legitimate loan on their part ). If that doesn't happen, you may well be reading about this in the papers. Chase deserves all the bad publicity I can give it, starting with this thread.

Re: Chase's overdraft fee scam

Try to relax a bit. Chances are things will not be as bad as you are thinking right now. Don`t try to pretend your are anything but her concerned son. The bank may very well forgive many of the fees...they probably want to keep your mother as a customer...and since she does not have a history of bouncing check will work with her. Just take it easy.

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Talk to the bank manager and explain it all in a nice way. He or she has the power to fix it. How you talk will make all the difference.

There is no way I would start talking class action lawsuits, or posing to be a lawyer. Once it gets to that point you'll be referred to their legal department and the manager has nothing to say.

Good luck with it.

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I've not figured out why banks get away with the overdraft policies.

In essence, they participate in the writing of bad checks, and they profit handsomely in the process.

In Calif, you are not allowed to write a check for more than you have in your account. That's a crime. But the banks routinely aid and abet you in that crime by cashing the check and charging you a fee. The fact that it drives the account negative allows them to pile on hundreds of dollars in fees when subsequent checks bounce because of the very fees that they charged for the bounced check that they cover.

So here's my question: How do we get the banks prosecuted for aiding and abetting criminal activity? Since they do it on such a wide scale, the RICO act should apply since it rises to the level of racketeering.

I wish.


Daniel

Re: Chase's overdraft fee scam

gadget_lover said:

I've not figured out why banks get away with the overdraft policies.

In essence, they participate in the writing of bad checks, and they profit handsomely in the process.

In Calif, you are not allowed to write a check for more than you have in your account. That's a crime. But the banks routinely aid and abet you in that crime by cashing the check and charging you a fee. The fact that it drives the account negative allows them to pile on hundreds of dollars in fees when subsequent checks bounce because of the very fees that they charged for the bounced check that they cover.
So here's my question: How do we get the banks prosecuted for aiding and abetting criminal activity? Since they do it on such a wide scale, the RICO act should apply since it rises to the level of racketeering.

I wish.


Daniel

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Are you serious? They are only providing a service not enabling criminal activity. I watched the recent hearings before our glorious congress regarding said fees and it boiled down to 2 camps, one that says banks should stop offering this service and let the customers go to jail and the other was they shouldn't be allowed to profit from ones inability to run their finances correctly and floating checks/debit purchases due to stupidity. Plus what about the returned check fees the bank saves the ill prepaired customer by covering the debt? Then they would whine about the returned check fees retailers charge. :shrug:
The bank honors the debt which is what a check/debit purchase is resulting in a measured amount of risk and more processing so why shouldn't they be allowed to recoup that outlay with profit?

I personally believe that the practice should be halted and let those who can't manage their affairs suffer the consequences with one exception, any person with the financial common sense to have a savings type account with constant balance of funds linked to the primary checking account so that any overdraft has the funds available and immediately collected.

Re: Chase's overdraft fee scam

Beamhead said:

Plus what about the returned check fees the bank saves the ill prepaired customer by covering the debt? Then they would whine about the returned check fees retailers charge. :shrug:

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In this case a returned check fee would have been preferable. Once it happened my mom would have realized she had insufficient funds in her account, and taken care of it ( and likely not even questioned the fee as she would have realized it was her fault ). Instead, the bank covered for what was essentially an honest mistake, charged a per check fee which likely would have been about the same as a bounced check fee ( although I still have no idea how much they charged as it was never put on any statements ). And by their covering the check and adding fees, the account balance remained negative, allowing them to charge fees on every subsequent check since despite my mom adding more than enough to the account to cover all her subsequent checks, all without making my mom aware of exactly what they were doing.

As for the bank covering their risk by charging these fees, what they are essentially doing with overdraft is offering a credit line. Funny how banks are happy to offer people a credit card where simply charging 21% or 28% or whatever interest on the unpaid balance is considered sufficient to cover their risk, yet here they feel the need to also tack on what is essentially a per transaction fee ( and an exorbitant one at that ) in addition to similar interest rates on the unpaid balance. Had they simply only tacked on a finance charge, then we may have only been talking about a few hundred dollars here, not close to $3000. What they did was to charge an unreasonable fee relative to their risk ( remember that my mom has not had a habit of bouncing checks ). They charged fees that amount to usury, and caused the situation which will be impossible to get out of, all without giving one inkling of what they were doing.

Bad enough doing this on a checking account, but it's inexcusable on a debit card. With a debit card, if you try to do a transaction that would bring your balance negative, very simple answer is the bank should refuse and say insufficient funds like they did before someone got the bright idea of offering customers this "courtesy". Either that or say if we process this transaction the fee will be xx dollars plus interest. People would get the idea that they can't spend more than they have when that cup of coffee suddenly will cost $38. It's really cute how the banks "cover" for people's mismanaging of their finances, not tell them how much it will cost them ( except in fine print buried in pages of hard-to-read legalease ), and let it continue to literally months. My biggest question in all this is why weren't the fees broken down on statements we received? Even if one agrees the banks are in the right charging these kinds of fees, how can not informing a customer of the fees possibly be legal? That fact alone makes it essentially impossible to balance your checkbook once it goes into overdraft.

As it stands now, the banks are not only enabling people's irresponsible spending habits, but also profiting handsomely from it, and digging a hole for these people which they will find impossible to get out of. I think bounced check fees and "insufficient funds" on debit cards are preferable. No argument from me that it's high time the populice learned to live within their means. The irony is that my mom has been doing exactly that her entire life, and yet she is treated the same as someone who thinks nothing of going into debt for their morning coffee.

Re: Chase's overdraft fee scam

Greg G said:

Talk to the bank manager and explain it all in a nice way. He or she has the power to fix it. How you talk will make all the difference.

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The plan is to be reasonable so long as they're reasonable. If it seems they have their minds set on letting things stand, only then will it be time to get nasty. By that I mean doing things like possibly calling the local news stations and also writing letters to politicians. Not that I'm a fan of politicians, but many would welcome this as a photo op to show "how much they care for the common person". And the embarrassment to the bank might actually cause them to rethink their bad decision. But yes, I'll play nice, at least at the start. After that, the ball is in their court. As leverage, I do have a substantial amount myself on deposit with Chase in both a savings account and IRAs. I could threaten to take my banking elsewhere if they refuse to make an adjustment, but I'll only do so after asking them nicely with no threats. Let's just hope we have a sympathetic bank manager. I would hope keeping two long-time customers in good standing ( I've never bounced a check and always pay my credit cards in full each month ) is more important to them than a few thousand in fees.

Re: Chase's overdraft fee scam

Two things to say about this.

We had a huge lawsuit going on over here about unfair bank charges and It was decided to do a test case which dragged on for nearly 2 years. During this time all other similar lawsuits were put on hold till the outcome was decided. This is the good bit.. During this 2 years the banks were still allowed to charge exorbitant fees but no customers were allowed to apply against unfair fees and have them removed till the outcome of the test case.
The outcome, after two years the court decided that the Office Of Fair Trading who brought the test case, didn't have the authority so we all went back to the way it was. Fat load of good that did.

Secondly, I can't believe that you still use cheques so much over there. The Romans used cheques over 2 thousand years ago and in some countries in Europe such as Denmark, personal cheques don't even exist anymore. I have a chequebook but I haven't used any for years. I don't think I've even carried or paid cash for anything in at least a year.
What is the American love affair with cheques ?

Re: Chase's overdraft fee scam

I don't think all of us are talking about checks exclusively, I'm certainly not (I write a single check a month for rent, and that's it, ever).

Our ATM/Mac cards are issued by our banks, and can be used at any place that accepts Visa or MasterCard, and since it's linked to our bank account, if you overdraft on that Visa/MasterCard you're charged a bounced check fee (although in many/most cases it's not a check).

Re: Chase's overdraft fee scam

jtr1962 said:

InThe irony is that my mom has been doing exactly that her entire life, and yet she is treated the same as someone who thinks nothing of going into debt for their morning coffee.

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Does she reconcile the account(s) every month?

Re: Chase's overdraft fee scam

Be polite when you visit the bank. But if they don't do the right thing, consult with an attorney. Banks respond to money. (And to the possibility of losing a chunk of it to a lawsuit.)

Re: Chase's overdraft fee scam

Jay R said:

Secondly, I can't believe that you still use cheques so much over there. The Romans used cheques over 2 thousand years ago and in some countries in Europe such as Denmark, personal cheques don't even exist anymore. I have a chequebook but I haven't used any for years. I don't think I've even carried or paid cash for anything in at least a year.

What is the American love affair with cheques ?

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Well, how do you pay for things over there? I'm asking because while it is possible to set up certain things to be paid electronically, it's by no means universal. The closest you can come is to pay for everything via a credit card, and then pay the credit card electronically. However, certain things can't be paid via CC for whatever reason such as electric bills, phone bills, cable bills, taxes, and probably a whole lot more. Granted, it may be possible to set some of those up for electronic transfer. Problem is there's a lot more to doing so than most people care to get involved with.

I personally make online purchases via CC or CC Paypal, then pay my CC electronically in full each month. Everything else, which is mostly small day-to-day items, gets paid in cash. My student loan is the only thing I make a check out for, although it's looking soon like that might be a moot point as legislation is pending to forgive student loan debt over 20 years old.

I'll also add that I generally prefer to be paid by check from my customers unless the amount is very small. The only alternative ( Paypal ) means fees of around 3%. It would be the same if I set myself up to accept credit cards.

As for my mom, she's not computer literate, and pays so many different bills that setting them up electronically would be nightmare, even for me. No argument from me that checks should eventually go the way of the dinosaur, but for some transactions there's just no reasonable alternative. We basically need some electronic equivalent of cash which can be freely exchanged without the burden of fees imposed by CC companies or Paypal in order to completely get rid of checks. In fact, if such a mechanism existed, I really wouldn't even need a CC.

Re: Chase's overdraft fee scam

You do business with a big bank, you are asking for problems. Find a community bank or credit union. Their policies tend to be fair. They tend not to try to fleece you with stupid policies and outright scams.

When I listen to the Clark Howard talk show, there is always someone calling in and bitching about some big bank.

You can setup about all of your reoccurring bills for electronic bill pay. You just login, enter ammounts and click the mouse, nothing to it. Just get out of that scam house bank first.

Re: Chase's overdraft fee scam

Beamhead said:

Does she reconcile the account(s) every month?

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Yes, she does but things got screwed up in July on account of her being in the hospital. Also, I've been going over the last 7 months of checking account statements, and now I'm not sure exactly what is going on. The situation might not be exactly as I first thought it was. She has made minor errors in the past balancing her checkbook, but I've always been able to sort those out before it led to any problems. Her checkbooks from early August through now all look to be OK. Something may have happened in July, perhaps she wrote in a check and then added the check amount to the balance instead of subtracting it. She had done that once or twice in the past. Don't forget that in July she was right off of hip replacement surgery, not in the best state of mind, in pain, and of course it was the height of hot weather ( which she and I both dislike with a passion ). I was busy with business matters and/or running household errands at the time, and thus not really able to help double check her figures ( and she didn't ask for help anyway ).

Anyway, she may have thrown away those checkbooks so I might never know exactly what happened. She had a balance forward of $1500+ in the checkbook starting in early August. I honestly think she may have added a large check instead of subtracting it but without the physical checkbook I've no way of knowing. It's also possible she made a deposit to her account but was never credited for it. Again, no way of knowing unless we find her checkbook for July. Anyway, reconciling the July statement ( which would have ended about $100 in the red not assuming any bank fees and also not assuming that there were uncredited deposits ), and continuing on to the last statement, I ended up with the account being about $1500 in the red. The overdraft statements showed a balance of something like $1700 and change for the same date. So it appears that yes, things have been on overdraft since mid July, but the only fee being charged is interest of 20.9% on the outstanding balance. There are not per check fees as I initially thought.

At this point then I don't think a visit to the bank is needed. I based my initial post on the assumption that my mom's checkbook reflected the true state of her account. This was indeed the case up until mid-July but after that something happened. We may never know what happened, but the fees imposed by the bank to cover the overdrafts these last seven months are apparently less than $300 in interest. It's fair and I'm not even going to argue it. Henceforth I'm going to do my mom's checking account with the same software I've been using for my own accounts. No chance of math errors that way. I also advised her to put enough into the account soon to bring it into the black, and then we'll keep it that way.

Nevertheless, I think this thread serves a valid purpose in that there have been quite a few instances of things happening exactly as I initially described it. A person falls a little short one month, bank covers it but debits large fees from the account, and then account remains perpetually in the red, eliciting continual fees every month. Unless you can get an overdraft protection like my mom's checking account has, where you only pay interest on the outstanding balance, then don't do it. Those $35 fees can quickly bankrupt you.

Sorry all if I got things wrong. It turns out in reality that the situation wasn't as bad as I initially made it out to be, but it took me the better part of a day to sort it all out. It's still not completely sorted out, but at least now I know the bank didn't take my mom for ride to the tune of close to $3000.

Re: Chase's overdraft fee scam

jtr1962 said:

Well, how do you pay for things over there?...

However, certain things can't be paid via CC for whatever reason such as electric bills, phone bills, cable bills, taxes, and probably a whole lot more.

Click to expand...

Do you not have Debit Cards over there? My Visa is a debit card that comes with my bank account. The funds come directly from my bank account. Having said that, I also have a Matercard credit card that I also use though I pay it off every month. So far I haven't come across anything that I can't pay with either. Pretty much everyone who has a bank account gets a debit card with it.