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Target “Debit Card” Results in Excessive Overdraft Fees Class Action

When is a debit card not a debit card? According to the complaint for this class action, Target debit cards are not because they do not play by the rules followed by other debit cards. In fact, the complaint claims, the Target card is more like a “shrouded electronic check” in that there is no direct linkage to the customer’s account at the time of use and no rejection of transactions for insufficient funds.

The class for this action is all consumers in the US who, within the statute of limitations, incurred returned payment fees in connection with their Target debit cards.

Target offers its “debit card” with the advantage of a 5% discount on all Target purchases. The card is used like a traditional debit card, with the user required to punch in a PIN number at the time of purchase. But the complaint claims that the card differs in very important respects that has resulted in excessive charges for some customers.

Normally, when a user buys something with a debit card, the swiping of the card connects it with the user’s bank account. If the user has requested overdraft protection on the account, and if the account does not contain enough money to cover the transaction, the transaction is declined. This keeps the user from having to pay an overdraft fee.

But the complaint alleges that the Target card is not connected to the user’s bank account. Even if there’s not enough money in the account to pay for the transaction, it will not be declined, because the card has no way to instantaneously check with the bank account.

Also, the complaint says, unlike with real debit cards, the transaction must go through the Automated Clearinghouse (ACH) network. While this could be done more quickly, the complaint claims that Target holds back transactions for several so that it can have them processed in larger batches. Apparently, this saves it ACH processing fees. For consumers, the delay means that funds that were available before may not still be available.

If the funds in the account do not cover the transaction, Target charges a returned payment fee (RPF). But the customer’s bank will also charge a fee for non-sufficient funds (NSF). This means that the initial “overdraft fee” may be around $60.

Finally, Target continues to try to obtain the funds, resubmitting the transaction periodically. Each time the account comes up short, it charges the customer another RPF, meaning that the customer may end up paying as much as $100 for the overdraft.

Meanwhile, the customer expected the transaction to be declined if funds are insufficient. And if an overdraft somehow does occur, the customer expects only one much lower fee to be assessed.

Among other things, the complaint alleges breach of contract, unjust enrichment, and the violation of California consumer protection laws. 

Article Type: Lawsuit
Topic: Consumer

Most Recent Case Event

Target “Debit Card” Results in Excessive Overdraft Fees Complaint

June 29, 2016

When is a debit card not a debit card? According to the complaint for this class action, Target debit cards are not because they do not play by the rules followed by other debit cards. In fact, the complaint claims, the Target card is more like a “shrouded electronic check” in that there is no direct linkage to the customer’s account at the time of use and no rejection of transactions for insufficient funds.

target_debit_card.pdf

Case Event History

Target “Debit Card” Results in Excessive Overdraft Fees Complaint

June 29, 2016

When is a debit card not a debit card? According to the complaint for this class action, Target debit cards are not because they do not play by the rules followed by other debit cards. In fact, the complaint claims, the Target card is more like a “shrouded electronic check” in that there is no direct linkage to the customer’s account at the time of use and no rejection of transactions for insufficient funds.

target_debit_card.pdf
Tags: Debit Card, Deceptive Business Practices, Overdraft Fees