This class action lawsuit claims that People's United Bank systematically assesses overdraft fees on transactions when there is enough money in the checking account to cover the transactions presented for payment.
One plaintiff in this lawsuit is a resident of Bridgeport, Connecticut. When she opened her account, she entered into a contract with People's United Bank in which the bank agreed to charge overdraft fees when her account did not have money to cover the transaction. People's United Bank breached this contract on multiple occasions. For example, on May 26, 2016, the plaintiff had a positive account balance of $22.11 when she made a purchase for $4.76, leaving her with a positive balance of $17.35. Despite the fact that she was left with a positive balance, she was assessed an overdraft fee of $37.
Overdraft fees constitute the primary fee generators for banks and credit unions. In 2009, banks generated an estimated $37 billion from overdraft fees on debit purchases and ATM transactions. Studies have shown that more than 90% of customers who were assessed overdraft fees overdrew their account by mistake and that more than 60% of the transactions that result in a large overdraft fee were for less than $50. The federal government has also stepped in to provide additional protections to customers with respect to abusive overdraft policies. In 2010, the Federal Reserve Board enacted regulations giving financial institutions the authority to charge overdraft fees on ATM and one-time debit card transactions only if the institution first obtained the affirmative consent of the customer to do so.
People's United Bank entered into two contracts with its customers regarding overdraft fees. They both stated that overdraft fees would not be assessed unless a transaction was made with insufficient funds. “Insufficient funds” does not suggest the inclusion of any holds on the money in the account. Regardless, People's United Bank charged overdraft fees when there were holds on accounts stemming from pending transactions. In November 2016, People's United Bank changed their Account Agreement to reflect the overdraft fees calculated from holds on pending transactions, reinforcing their previous actions.
Based on the facts of the case, the plaintiffs in this lawsuit allege the following violations: