Is this normal NSF/overdraft fee behavior? Bank of America

Factual Questions
1

I have a bank of America checking account that I don’t use much anymore, except that I already have a bunch of automated bill pays and my paypal account attached to it, so I just keep it open with just enough to cover that stuff.

I very specifically had them set up the account so that in the event of an overdraft, it would decline the transaction. I don’t want overdraft fees, I always just want charges that don’t have the funds to decline. I had the manager set me up for that in no uncertain terms.

So anyway, I forget my main debit card yesterday. I know I’ve got something like $50-60 in my BOA account, and I have about $50 worth of groceries. So I figure, well, I’ll just charge it to the card, and if it’s declined, I’ll go fetch my other card. It’s approved, so I figured I must be covered.

So I go home, check my account statement, and it turns out I’m now at $-2.38 balance. And now I have 2 $35 Overdraft/Returned Item Fee charges on my account.

So first thing, it’s unambiguously supposed to decline point of sale terminal purchases if I don’t have the funds - I had to enter my pin and everything, it was a normal transaction. But even ignoring that, there are no other charges listed for the last week on that account. How could I have 2 overdraft charges?

So I called up their customer support, and they tell me that the overdraft charges aren’t actually for the point of sale grocery purchase. They’re for 2 small paypal purchases I made, of $6 and $3, which I had 4 days ago. Those charges aren’t listed on my page, I said. And they said yes, that’s correct, they’re not listed because the account was overdrawn when they came in, therefore they were declined. She directed me to a dispute claim line, but neglected to give me a dispute claim number, which means I couldn’t get past their automated system. After getting bounced around by phone robots, I just said fuck it and scheduled an appointment at my local branch tomorrow.

So, here’s the situation as far as I understand it:

On 9/29, I make a paypal purchase for $6 and $3. My account has $55 in it at that point. These paypal purchases never show up in my bank statement. On 10/1 (2 days later), I make a grocery purchase for $57, which causes my account to become overdrawn $2. I get 2 overdraft fees listed on my account at this point.

The $57 POS purchase should have been declined. Customer service claims that I have my account set up to decline all purchases that would overdraft me, which is why the paypal charges were declined. Except she can’t explain why the $57 purchase would go through in that case. And according to customer service, the actual overdraft, going from 55 to -2, wasn’t the source of the overdraft fees. The two paypal purchases were. Which also doesn’t make sense.

The $6 and $3 paypal purchases WERE declined, due to insufficient funds in my account at the time they were processed apparently. But if they were declined, why do I get an overdraft charge? Nothing came out of my account. Is it typical business practices to decline a charge and then still charge the customer an overdraft fee anyway?

The whole thing feels like bullshit. Yes, I kinda fucked up here, except that they specifically told me that POS purchases with my debit card would be declined if there were insufficient funds. So if they were living up to their end of the agreement, that wouldn’t have gone through, I’d have ran home for my other credit card, and my account would’ve had money in there when the paypal purchases hit. And then - having them confirm they declined a charge and then charging me the overdraft fee anyway - that can’t be right, can it?

Anyway, I’d like whatever information I can get when I go in to talk about the manager tomorrow. I’ll probably close my account because I’m sick of this bullshit, but I’d like to get the fees waived first if I can.

2

I can’t really answer any of your questions. However – I have had some overdraft charges from BOA in the past, and I spent some time “complaining” to them on the phone about them, and eventually they waived half of the fees (4 overdrafts, they only charged me for 2 of them, if my memory serves).

Overdraft charges are actually pretty big business for banks. They’ll bend over backward to process your recent transactions in such a way as to maximize their profit. I’m not saying that happened in your case, but it can happen.

http://mobile.businessweek.com/articles/2013-06-11/debit-card-overdraft-fees-remain-profitable-for-banks

3

I can’t answer for BoA, but I have a USBank account and I just got notification of a class action suit against them (several suits, in different states, apparently). What they were doing, which may be declared to have been illegal, was to process all daily withdrawals before deposits, and, to process those withdrawals in reverse order by amount (so the the largest are processed first). This will assure that the bank will always insure that they get the maximum overdraft fees on a given day.

My current account with them specifies that deposits will always be processed first, thereby minimizing any overdraft fees they can get from me.

I’s sure that your banker will try to weasel his way out of giving you any money back though. I don’t know why a $4 and $6 transaction were rejected when there was $50 in the account. That’s what I’d hit them with first. Good Luck.

Bob

4

I have vague recollections of something similar to this happening to me (at a different bank). It’s true that nothing came out of your account, but the computer spent a few milliseconds figuring that out, and it’s all your fault, and so they will make you pay for it.

Sounds like you did a good job of making sure that the transactions would get declined, and they were real nice folks and didn’t want to upset you by pointing out the Declined Transaction Fee. I’m sure it’s in your paperwork somewhere, but you’ll never find it because they called it something else.

Just in case you can’t tell: I hate the banks as much as you do. Maybe more. I finally climbed out of the hole a couple of years ago, but the fees I was paying before that … I don’t even like thinking about it. :mad:

5

Looking at the checking account fees for BofA:

Sounds like you’re in option 2. Transactions get declined and you pay $35 per.

6

Here’s my guess of what happened. Before I begin, let me admit that my idea makes sense ONLY in terms of “sequence of events”. My story does NOT fit the numbers. My story will be accurate only if SenorBeef is mistaken about some of the dollar amounts. Here goes:

The PayPal purchases were first, but they weren’t really paid. They were only “authorized”, and they got authorized because there WAS enough money in the account at that point. But for some reason, it took a few days for the transaction to be finalized and paid. Meanwhile, there IS enough in the account to cover the groceries, so that transaction is finalized and paid. THEN PayPal finally gets their act together, and there is almost nothing left in the account, not for the $6 item, and not even enough for the $3 item. Net result: Two Declined Transaction fees for PayPal, but the grocery is fine.

This exact sort of thing has happened to me. I went to the bank and said the equivalent of: “When PayPal authorized the two transactions, you put $9 of my money on hold. I know that, because I looked at my balance, and the Available Balance was nine dollars less than the Total Balance. If I went to the ATM, I would not be able to withdraw those nine dollars, because you are “holding” it for PayPal. So where did you get the right to give those nine dollars to the grocery? You should have declined the grocery, and then there would be enough money in the account for PayPal, and I’d be charged only one fee instead of two!”

And the bank manager insisted that I did not have a correct understanding of what “hold” means in this context.

7

Woops. Wrong thread.

8

I am part of the same sort of class-action suit against PNC Bank.

But merely having the deposits processed first is insufficient. It won’t help you if the deposit isn’t big enough, and it certainly won’t help if there are no deposits that day. What will help is the order in which the checks are processed. By processing the biggest ones first, they increase the chance that there will be several small checks bouncing, instead of one large one.

This would be most easily solved by processing all the small checks first, so that if there’s not enough money, only one or two big checks would be declined. But I must admit that the banks might consider this unfair and to their detriment. I would be willing to compromise on processing all checks and deposits in the order that they are rpesented to the bank; this is surely the most impartial rule.

9

How do you have Paypal set up to draw from the account?

Did you link your debit card to your Paypal account or do you have them do a direct withdrawal (ACH) from your checking account? In other words, did you give Paypal your debit card number or your checking account number?

If the latter, then the Paypal withdrawals are done via ACH (Automated Clearing House) debits. Unlike the debit card system, ACH has no way of getting an authorization or checking your balance at the time you make the purchase and it cannot place a “hold” on your account. The debit is sent through the clearing house and when it arrives at your bank either the bank pays it or returns it based on your balance at the time the debit was processed. (Actually, if you want to get technical, the bank has until midnight the following banking day to return it.)

So if you made a Paypal purchase four days ago paid by ACH and the debit didn’t arrive at your bank until after you made the $50 purchase, your bank would have no way of knowing that the debits were on their way and would arrive later and hence couldn’t decline the $50 purchase.

But, I would find it strange that the returned Paypal debits didn’t appear on your statements. Most banks would list the debit and then, on a separate line, reverse the returned debit.

On the other hand, if you gave Paypal your debit card number to charge, all that I can think of is that perhaps Paypal didn’t get a proper authorization before putting the charges through?

10

PayPal is set to do an electronic transfer. I know it takes several days to withdraw that way. Not sure about deposits.

11

OK, so the Paypal payment is going through ACH. ACH does not do any pre-authorizations or put any holds on your accounts. It doesn’t work like a debit card and that’s not part of the system. ACH works sort of like a paper check, but one that is transmitted electronically instead of written on paper.

What probably happened is when you made the $57 purchase, the bank just let the $2 slide as a courtesy. Since you declined overdraft protection, they can’t charge you a fee for that. That made your balance negative.

Then the $6 and $3 ACH debits arrived and nothing was available in your account. They came in just as though you had written two checks on your account and the people you gave the checks to had just come into the bank to cash them. Unfortunately, they had the bad timing to come in just after you made your $57 debit card purchase and depleted your account.

It is common for banks to charge bad-check fees even if the checks are returned unpaid. Same is true for ACH debits.

If you want to avoid this situation, you have to take responsibility for keeping track of your own balance. When you use your debit card, the bank has no way of knowing that you also have some electronic (ACH) transfers that are coming in the next day or whether you have written some checks that haven’t been cashed yet. Yes, with debit card purchases there are holds that are placed in advance of the transaction clearing that can help prevent overdrafts, but with other forms of payment, there is no such mechanism. If you make electronic transfers or write checks and then clear out your account before the transfers/checks clear, then the transfers/checks are going to bounce. And there is a fee for bouncing.

12

In my limited experience, banks don’t mind crediting overdraft fees if you complain, but I’d go to a branch instead of doing it over the phone. I had a situation with a different bank where I had $600 in an account, purchased something for $500 and it put me in the negative somehow but the cause never really showed on any statements.

Apparently, when I bought it, the bank put a $500 hold on the account leaving me with $100 and somehow the actual withdrawl happened while the hold was still on there putting me $400 in the negative while several smaller $5 type debits went through racking up over $200 in overdraft fees. Then the hold was released and I was back at $100, except the overdraft fees took that and put me at -$100.

I spent six weeks arguing, sending receipts, statements, faxes etc to the bank’s 1800 number people, the company I purchased from, and Visa (who all three denied it was their fault). It really wasn’t worth the time, but I kept thinking it would be resolved on the next phone call so I kept at it, and I should note that I only called when I had free time at work, and some days I didn’t have time to work on the problem at all. Still, I spent many hours on it.

I finally went to a local branch and asked for a manager. He barely listened long enough to realize that something confusing had happened and I might not have been at fault, then promptly credited me with the $200 and told me not to call the 1800 number because “those people are idiots.”

13

Yes, this is official BoA crap. This happened to me shortly after my divorce when I was literally living day to day. I screwed up and somehow mis-calculated my balance and used my debit card for $25 in gas (that put me into a negative), $15 worth of groceries and something like $6 for a McDonalds. Instead of BoA declining all the they let the charges go through and charged me $35 each for the the purchases. I was unaware of this policy and the manager said that it was a service to me, to keep me from being unable to make a purchase. Screw you BoA.

If I recall correctly I think that there was a huge uproar about this a year or two ago. The practice was called predatory and I seem to recall the Government forcing the banks to give customers an option to opt our of this service. I think that it is shameful of banks to do this to people. They do it under the guise of being customer friendly, but three reality is they are screwing the poor person. If there isn’t enough money in an account to cover a purchase, the bank needs to decline the charge. Covering a two dollar charge and then billing your customer $35 for the privilege is down right disgusting. How these people live with themselves is beyond me.

And yes, I am a right wing hardcore Republican, that doesn’t mean that I think banks should have a free hand at screwing people.

14

Ditto. What **obbn **said. All of it. Except that I’ve heard the exact same thing from PNCbank, Wachovia, and Wells Fargo.

15

Read those disclosures.

16

That just means that the predatory practices have been disclosed, not that they are fair or justified in any way.

17

There’s a reason Bank of America has been sued and fined so many times in recent years.

18

I’ve just received this my email from Bank of America: (10/04/2013)

"Many of your frequent debit transactions on your checking and savings accounts will now be posted in a different order. This order will affect how your transactions appear in Online Banking and on your monthly statements.

Today, we generally post most transactions in order of highest to lowest dollar amount, which may be different than the order in which you made them throughout the day. Now you’ll start to see many of your most frequent debit transactions subtracted from your balance in the order you made them."

Hope this helps.

19

Huh? Not all of them, and not some of them. “Many” of the “most frequent” ones.

I wish I knew what that means for the less frequent transactions, or for the ones which are not of the “many”.

Is it really that hard to simply process each in sequence? They do have timestamps on them, don’t they?

20

I’m also with US Bank, got the same notice.

My reaction: WTF!

I did contract programming in SF for 20 years. Being SF, most of this work was financial, esp Wells and BofA.

Checking accounts are known in the banking world as DDAs (Demand Deposit Account).

Everybody in the DDA departments could recite, in their sleep:

Post all debits before any credits
Post debits highest to lowest
How to post debit:

Current Bal = Current Bal - debit
if Current Bal < 0
Add +1 to OD count
(post next item)

This was deliberately done specifically to maximize overdraft fees

As far as I know, this was universal in DDA processing - everybody who issues DDA accounts uses this process.

If this is now illegal, the change is on the order of electing a black man President and getting semi-universal healthcare in the US.

As to OP: the suspect here is why the delay in posting the paypal transactions. Read fine print - legal counsel reviews issues such as these.