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Flagstar Multiple Non-Sufficient Funds Fees Investigation

What happens when an auto-pay bill comes due in your Flagstar Bank account—say, your auto loan payment or Internet service bill—and there’s not enough money to cover the transaction? If Flagstar refuses the transaction, it will charge you a non-sufficient funds (NSF) fee. So far, so good.

But what if, in the following days, you’re charged another such fee, and maybe a third one? And you haven’t put more money in your account or requested that the transaction be tried again?

That is, even though you might want to wait before trying the transaction again, Flagstar may decide to retry it. And if the transaction fails to go through again, you’ll owe another NSF fee.

Is this fair? We’re investigating to see if a class action is needed.

Some banks, in fact, permit themselves to do this. They put this in the fine print in their deposit agreements, fee schedules, and other documents. Flagstar does mention NSF fees in its Disclosure Guide.

For example, it says, “[W]e may return (i.e., not honor or reject) any Item that would cause your account to become overdrawn, or further overdraw your account. If we do not honor such an Item, the transaction will be considered a non-sufficient funds transaction and we may assess a Non-Sufficient Funds Charge against your account.”

It also says, “We may assess … more than one Non-Sufficient Funds Charge to your account each day, depending on the number of checks and other Items presented on your account that day…”

The Fee Schedule lists an NSF charge of $36, described as “[a] charge for a returned, unpaid Item…”

Some legal experts believe that this means that the NSF charge is assessed per item. If an item is considered to be, say, “December Auto Loan Payment,” they say, the item remains the same item, even if it’s tried more than once. Flagstar’s fee schedule does not list a “Fee Per Try” or “Retry Fee” or similar charge.

Is Flagstar violating its own agreements?

Flagstar is one of the largest residential mortgage servicing companies and one of the largest banks in the US.

Flagstar was founded in 1987 as First Security Savings Bank. Its parent company, Flagstar Bancorp, Inc., is listed on the New York Stock Exchange.

Flagstar had difficulties during the 2007-2008 financial crash. It took part in TARP, the federal bailout. In 2012, the Justice Department filed a complaint against it for improper approvals of mortgage loans for government insurance. It eventually reached settlements concerning its residential mortgage-backed securities with Freddie Mac, Fannie Mae, and the Consumer Financial Protection Bureau.

If you have a Flagstar account in the US and you’ve been charged multiple NSF fees on a single item, we’d like to hear from you. Fill out the form on this page and let us know what your experience was.

Article Type: Investigation
Topic: Consumer
No case events.
Tags: Excessive Fees, More Than One Fee Assessed on a Single Item/Transaction, Your Bank