When a bank charges you not only an overdraft fee, but additional fees on the days before you repay the overdraft, are those additional fees interest on a loan? This class action argues that they are, and that Citizens Bank’s specific additional fees on overdrafts therefore violate federal laws against usurious interest charges.
The class for this lawsuit includes all checking account customers of Citizens Bank who were charged a Sustained Overdraft Fee between June 7, 2015 and June 7, 2017.
When Citizens Bank Checking customers overdraw their accounts, and the bank honors the debit rather than returning the check or refusing the withdrawal, it charges those customers an Overdraft Fee of $35. The class action makes no argument against this fee.
However, if the customer accounts are not returned to a positive balance within a short period of time, the complaint says, Citizens charges them additional fees, for every business day or every several business days. Since the only benefit the bank offers in exchange for these fees is the continued loan of the funds, and since the amounts charged depend on the length of the loan, the complaint argues that these fees are actually interest.
It further argues that the fees charged amount to excessive and illegal rates of interest, using the example of plaintiff Barbara Fawcett's overdrafts over the past couple of years. During that time, Citizens had two different ways of calculating its Sustained Overdraft Fees, at first charging $6.99 every business day and on later overdrafts charging $30 every few days. For both of these charges on Fawcett’s overdrafts, the complaint calculates the annualized rate of interest and claims that the rate is excessive.
The National Bank Act, which is part of federal law, limits the amount that national banks can charge as interest. The complaint calculates that, under this law, the maximum permitted rate of interest for Fawcett’s accounts during the period in question was 21%. However, it further calculates that if the Sustained Overdraft fees were considered interest and annualized, Fawcett was charged an average interest rate on her overdrafts of 931%.
This class action claims that Citizens Bank violated the National Bank Act and charged its customers excessive rates of interest.