Banco Popular Overdraft Fees Charged on Accounts Not Overdrawn Class Action

This class action brings suit against Popular, Inc., which does business as Banco Popular. The complaint alleges that the bank charges overdraft (OD) fees on accounts that were never actually overdrawn.

The class for this action is all Banco Popular account holders, who, during the applicable statute of limitations, were charged OD fees on APPSN transactions on a Banco Popular checking account.

The complaint alleges that Banco Popular’s “checking account contract documents discussing OD Fees promise that Banco Popular will only charge OD Fees on transactions where there are insufficient funds to cover them.”

How does this happen? The complaint points to a practice called Authorize Positive, Purportedly Settle Negative (APPSN). This happens because a debit card transaction is completed in two steps: First, it is authorized; then, possibly days later, it settles.

According to the complaint, when the bank authorizes a debit card transaction, it reduces the account balance to cover the transaction. It sets aside those funds to cover the transaction and displays an “available balance” that reflects the subtraction of those funds. The account holder cannot use those funds for another purpose. The complaint alleges, “As a result, customers’ account will always have sufficient available funds to cover these transactions because Banco Popular has already sequestered these funds for payment.”

However, Banco Popular still sometimes charges OD fees on these transactions when they settle at a later date. How does this happen? If another transaction overdraws the account before the original debit card transaction settles, the complaint alleges, then Banco Popular considers that the debit card transaction is settling into a negative account. This is the APPSN procedure. However, the complaint contends that since the funds were set aside, they should always be available for the settlement of the original debit card transaction.

The complaint supplies an example of an APPSN transaction. It claims that Frankie Lipsett undertook a debit card transaction on March 29, 2021, for which funds were deducted immediately. However, when the transaction settled on March 30, Lipsett was charged an OD fee on that transaction.

The Consumer Financial Protection Bureau (CFPB) considers this practice “unfair” or “deceptive.” The complaint quotes the CFPB as saying, “Consumer likely had no reason to anticipate this practice, which was not appropriately disclosed. They therefore could not reasonably avoid incurring the overdraft fees charged.”

The complaint alleges, “There is no justification for these practices, other than to maximize Banco Popular’s OD Fee revenue.”

The sole count is breach of contract, including the covenant of good faith and fair dealing.

Article Type: Lawsuit
Topic: Contract
Tags: Breach of Contract, Breach of the Covenant of Good Faith and Fair Dealing