Bank of Greene County Overdraft Fees on APPSN Transactions Class Action

When a transaction overdraws a checking account, many if not most banks charge an overdraft fee. The complaint alleges that the Bank of Greene County (BOGC) charges an overdraft (OD) fee for transactions that did not actually result in an overdraft, through something called Authorize Positive, Purportedly Settle Negative (APPSN) transactions.

The National APPSN Class for this action is all BOGC checking accountholders in the US who, during the applicable statute of limitations, were charged OD fees on transaction that were authorized into a positive available balance. A New York APPSN Subclass has also been proposed for those in the above class in the state of New York.

When a debit card transaction is presented for approval, the complaint alleges, BOGC immediately sets aside funds from the debit cardholder’s checking account to reflect the amount being used for the transaction. After that, the cardholder will see a lower account balance that reflects the amount in the account after the transaction.

The accountholder cannot use the funds set aside for the transaction for anything else. The complaint therefore says, “Therefore, customers’ accounts will always have sufficient available funds to cover these transactions because BOGC has already sequestered these funds for payment.”

“However,” the complaint alleges, “BOGC still assesses crippling OD Fees on many of these transactions and misrepresents its practices in its Account Documents.”

How does this happen? Transactions do not settle immediately when they are made. The settlement, when financial institutions actually transmit funds, may happen up to a few days late. The problem may arise, the complaint alleges, if a subsequent transaction overdraws the account, depending on how BOGC handles its settlements.

Theoretically, because the initial debit card transaction was approved and the funds set aside, the account should always have funds to settle it. But the complaint alleges that “BOCG’s actual practice is to deduct the same debit card transaction twice to determine if the transaction overdraws the account—both at the time a transaction is authorized and later at the time of settlement.”

This is because of BOGC’s batch processing methods, the complaint claims: “Specifically, BOGC 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.” Thus, the transaction was approved with a positive account balance, but settles with a “purportedly negative” account balance.

Checking account customers are not aware of this step in processing, the complaint claims, and cannot take it into consideration. According to the complaint, this violates the terms of BOGC’s Account Documents.

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