Banco Popular Overdraft Fees on Accounts Not Overdrawn Class Action

This class action complains of a settlement practice that Banco Popular North America, which does business as Popular Community Bank engages in, known as Authorize Positive, Purportedly Settle Negative,” or APPSN. The complaint alleges that this results in the bank’s charging overdraft (OD) fees to customers on accounts that are not actually overdrawn.

The class for this action is all Banco Popular accountholders in the US, during the applicable statute of limitations, who were charged OD fees on an APPSN transaction on a Banco Popular checking account.

The APPSN complained of in this case involves, first, a debit card transaction. When a customer goes to make a debit card transaction, for example, with a store, the bank checks the account balance; if the account contains enough funds for the transaction, the bank authorizes it. This is the “Authorize Positive” part of the APPSN practice.

The bank then places a hold on the amount of the transaction, specifically associating the funds with the particular store transaction. The amount is subtracted from the available balance in the account, so that the customer cannot see it and cannot spend it on anything else.

Because the funds have been set aside and associated with a specific transaction, the complaint alleges, that transaction can never overdraw the account.

However, the transaction may not settle until a few days later. That is, the bank may not actually transfer the funds from the customer’s account to the store’s account until then. According to the complaint, this is where the problem may arise, if another transaction overdraws the account in the meantime.

The complaint alleges that the bank has “a secret posting process” that creates the problem: “Banco Popular releases the hold placed on funds for the transaction for a split second, putting money back into the account, then re-debits the same transaction a second time.”

According to the complaint, “This secret step allows Banco Popular to charge OD fees on transactions that never should have caused an overdraft—transactions that were authorized into sufficient funds, and for which Banco Popular specifically set aside money to pay them.” This is the “Purportedly Settle Negative” part of an APPSN practice.

The complaint alleges that Banco Popular’s account documents do not authorize overdraft fees in these instances. It quotes the Consumer Financial Protection Bureau as calling this practice “unfair” and “deceptive” and saying, “Consumers 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 provides an example of this process involving the plaintiff in this case. It claims that funds were set aside for a transaction on March 29, 2021, but at the settlement of the transaction, on March 31, Banco Popular charged an overdraft fee.

Article Type: Lawsuit
Topic: Consumer
Tags: Breach of Contract, Breach of the Covenant of Good Faith and Fair Dealing, Overdraft Fees, Your Bank