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TD Bank Improper Assessment of Overdraft Fees Class Action

Can a debit card transaction cause an overdraft at settlement if the bank approves it when it happens and sets aside the funds required to settle it? The complaint for this class action alleges that if the bank has set aside the funds for the transaction, its settlement should never result in an overdraft. Yet, it alleges, TD Bank, NA has been charging overdraft (OD) fees on such transactions.

The class for this action is all account holders who, within the applicable statute of limitations, were charged OD fees on APPSN transactions in a TD checking account. A New York Subclass has also been proposed.

According to the complaint, TD Bank promises in its checking account contract documents that, when a debit transaction takes place, it will set aside the amount of the transaction immediately. The amount of that transaction will not appear in the balance of the account after that, so that the funds should always be available to settle the transaction; it should never cause an overdraft.

However, the complaint alleges that TD Bank nevertheless ends up charging OD fees on some of these transactions at settlement. This, the complaint alleges, breaches the bank’s duty of good faith and fair dealing and violates its agreements with customers.

The problem occurs, the complaint claims, because of a practice called “Authorize Positive, Purportedly Settle Negative” or APPSN.

Here’s how it works. When a debit card transaction is made, TD Bank approves it and sets aside the funds needed to cover it. The transaction may not settle until a few days later, but in the interim, the funds needed to cover it are not included in the account balance and not available to the account holder for any other purpose.

If, however, a different transaction occurs, in between the debit transaction and its settlement, and it overdraws the account, the complaint alleges that TD Bank may consider the settlement of the debit transaction as settling into a negative balance, thus creating a further overdraft.

The complaint says the Consumer Financial Protection Bureau considers this practice is “unfair” and “deceptive,” saying, “Consumers likely had no reason to anticipate this practice, which was not appropriately disclosed.”

According to the complaint, “TD (like all credit unions and bank) decides whether to ‘pay’ debit card transactions at authorization. After that, TD is obligated to pay the transaction no matter what. For debit card transactions, that moment of decision can only occur at the point of sale, at the instant the transaction is authorized or declined.”

The complaint therefore alleges, “There is no justification for this improper practice, other than to maximize TD’s OD Fee revenue.”

Article Type: Lawsuit
Topic: Consumer

Most Recent Case Event

TD Bank Improper Assessment of Overdraft Fees Complaint

October 7, 2021

Can a debit card transaction cause an overdraft at settlement if the bank approves it when it happens and sets aside the funds required to settle it? The complaint for this class action alleges that if the bank has set aside the funds for the transaction, its settlement should never result in an overdraft. Yet, it alleges, TD Bank, NA has been charging overdraft (OD) fees on such transactions.

TD Bank Improper Assessment of Overdraft Fees Complaint

Case Event History

TD Bank Improper Assessment of Overdraft Fees Complaint

October 7, 2021

Can a debit card transaction cause an overdraft at settlement if the bank approves it when it happens and sets aside the funds required to settle it? The complaint for this class action alleges that if the bank has set aside the funds for the transaction, its settlement should never result in an overdraft. Yet, it alleges, TD Bank, NA has been charging overdraft (OD) fees on such transactions.

TD Bank Improper Assessment of Overdraft Fees Complaint
Tags: Overdraft Fees, Your Bank