After years of grumbling about banks ripping their customers off with overdraft fees intended to inflict the most amount of damage, a suit seeking class action has finally been filed in Connecticut.
The West Hartford consumer law firm of Izard Nobel (our prime sponsor) has filed filed a suit against Webster Bank accusing the Waterbury-based institution of setting up an “unfair, deceptive, unconscionable” and secretive overdraft system designed to create as many overdrafts as possible for those live on the edge.
Webster spokesman Ed Steadham said today his company has a policy of not commenting on pending litigation.
The suit, which names Kelly Mathena, a Webster customer from Middlebury, as the the main plaintiff, cites Webster’s policy of allowing its customers to access funds from ATM machines even after they have no money left in their account and then charging them overdraft fees. Customers, of course, are not warned of the fees, the suit says. Bank of America – the largest bank in the U.S. – stopped a similar policy last month.
Another way Webster games its customers is a policy of manipulating their transactions so that the largest checks are cashed first resulting in the most number of overdrafts.
The Webster policy outlined in the suit is similar to what many other banks follow or used to follow. Additional lawsuits against other banks can be expected.
As an example of how Webster’s system works, if a customer has $1,000 in her account and sends out five checks, one for $950, and four for $75 each, Webster and many other banks will no debit the checks in the order they receive them, but rearranges them to first debit the $950 check so that the remaining four checks would each draw overdraft fees.
In previous columns I have written on the subject banks have claimed that this policy was a public service because large checks usually represent mortgage payments and they wanted to save their customers’ credit ratings by honoring the large checks first. Of course none of the banks had explicit permission from their customers for this policy.
“Webster’s undisclosed actual practice and policy is to uniformly and automatically create overdrafts for the purpose of maximizing overdraft fee revenue,” the suit says. “Consequently, Webster uses this purported discretion to unfairly gouge customers, an unfair and deceptive trade practice and a violation of the covenant of good faith and fair dealing.”
Another policy claimed in the suit, which I had not heard of, Webster immediately debits an account as soon as a customer enters her pin number for a transaction even though the merchant may not submit the charge for days. This results in overdraft fees even when a customer should still have money in her account.
To read the complete suit: _0429122247_001
Similar Posts:
- Webster Bank Upsets Customers By Charging For “Free” Checking Account
- Webster Bank Reverses Decision To End Free Checking For Many
- Wells Fargo Found By Judge “gouging and profiteering,” Ordered To Repay $200 Million
- Bank of America complaint: BoA inadvertently helping scammers
- Nation’s Largest Banks Still Charting Steep Overdraft Fees
- Citi Changing Check Clearing Policy To Reduce Overdraft Charges
I have one followup question to the last paragraph. The customer gets his or her money (or merchandise) after entering the PIN so why shouldn’t a bank debit at that time?
Because the bank keeps the money until the merchant files a claim and because this policy is not disclosed to the customer.
Not disclosed???? I am pretty sure my bank told me that the money for any purchases I make will be debited from my account. People shouldn’t be making purchases without the money in their account to begin with. If they DECIDE to- it’s a chance they are taking (and the fees for insufficient funds are disclosed).
RIGHT ON JANE! I really can’t believe that financially irresponsible people are being portrayed as victims.
This is ridiculous! What happened to personal responsibility? I am a Webster customer that lives paycheck to paycheck and I have never had a negative experience that wasn’t a result of my own bad financial decision. Despite the fact that it is against the law to make a purchase when you don’t have the money in your account, I have been known to play “the float.” I have made purchases with my Visa check card before my direct deposit comes in (fully aware that I also have outstanding checks) with hopes that I won’t overdraw. It’s time to man up and take responsibility for our own actions. In the event my checks come in and the purchase, I go negative and pay the fees I get. The bank fully discloses the fees to me (it’s in the disclosures people CHOOSE not to read) but sometimes I still take the chance. When you play with fire, you might get burned. I am so sick and tired of people whining about bank fees. Here’s a tip- Keep track of your balance like the adult you have to be to even get a bank account. Seriously…stop blaming the bank for your own personal financial errors.
I am a Webster customer. My savings is attached to my checking to cover the possibility of insufficient funds yet I am still charged if they have to transfer MY money to cover a bill. It’s my money why do I have to pay them ?
Another thing I gave my brother a check for $1500 on a Sunday. I did an online transfer of funds from savings to checking that same evening, it was reflected that the money was in my checking, but I know that it actually would not be there until the following day, Monday. My brother deposited the check at his bank( not Webster)(out of state) on Monday. I figured would take at least 2 days to clear at his bank…. they took the money out of my account that same day and charged an overdraft fee even though the transfer was on the same day but hours after they received the check request. How is that possible if I did an online transfer the night before, the transfer occurs the next business day. How is it they work faster to give my money away than to put my request through?
Definitely a problem. Not only with Webster but Wachovia also. I had a transaction on a Thursday that went from on hold to “done” and then the following monday it was the cause of a overdraft or two. Another purchase was the culprit – it was terminated by th ebank because it wasn’t submitted in 3 days by the store. Then the money was placed back into the account,then the store had to resubmit it the charge. One has to go very slow ,if the bank has a new employ or a sadistic one your screwed. You think your doing the bank a favor by not taking more cash and using the debit as cash.
Wow, people take money that is not there and they are the victims.
Here is real helpful advice for these poor people. go to the bank where your paycheck is issued take out your ID and cash it. If the Bank gives you a hard time have your boss call the branch manager, they must cash it. If they still don’t cash it call Izard Noble, they could use some honest business.
Put the money in an envelop then go to the post office and buy money orders to pay your bills. Keep what’s left, if anything, in the envelop, hope you don’t get robbed. Pay cash as you go. If you’re lucky enough to get ahead put the excess money in a passbook at your small local bank or credit union.
You now have zero exposure to the evil bank.
If you make the choice to live in the world of convenient currency; direct deposits, check books, debit and ATM cards don’t overdraw your account or you will pay. These things cost.
Paragraph 4, sentence 1 should be “cites”, not “sites”, I believe.
Thank you
Wow, this is amazing to me. People can’t keep track of what they’re spending and spending money they don’t have and it’s the bank’s fault??? I do not understand the empathy people are showing to these customers at ALL!!
I received the following statement today from Webster Bank
George,
Below, please see our statement below with respect to your request for comment Thursday.
Webster Bank Statement
Webster Bank has not received the formal complaint. Until we’ve completed a review of it, we cannot comment on the specifics in the lawsuit.
Honoring payment requests when the account lacks sufficient funds is a courtesy and convenience that we extend to our customers when, for example, they need to buy gas in order to get to work or groceries for dinner. It also saves the customer the embarrassment of having a purchase refused at a store, incurring late-payment penalties, or lowering their credit score.
Webster believes that it’s important to educate our customers on how to manage their checking account. We fully disclose all fees when customers open a checking account and provide them with a brochure entitled, “A Guide to Managing Your Checking Account,” which clearly and concisely spells out how consumers can avoid overdraft fees. This brochure is also made available on our website, at our branches, and to every customer who has incurred an overdraft fee.
This outreach is one aspect that distinguishes Webster from the competition. One of the best ways to avoid overdrafts is for customers to link their Webster checking account to their Webster savings account or a Webster credit line.
When I overdrew my account by bouncing a bunch of transactions, I called Webster’s customer service number. Since this was the first time this happened to me, they waived some of the fees and mailed me the Guide for Managing Your Checking Account. I keep it on my desk and refer to it like it’s a Bible. It tells me the order transactions will post to my account, among other details. Very helpful. I also linked my savings to my checking just in case though I haven’t needed it since!
Citizens Bank has the same practice going on. I was charged $195.00 in fees last month and then $37.00 in fees this month when all the while my bank account statement online said I had money on a tueday the next day it was changed automaticlly by there system to having insufficiant funds that day. I understand balancing a check book, but $195.00. This has been going on for years with them. Its a disgrace and a racket. They hold funds on purpose hoping you overdraw your account.
Very glad you ran the story about Webster’s deplorable practices. I banked with them for a short while, until a couple of months ago when I was subjected to the exact practices you reported. My account was not insufficient but, as you described, they’d process the payment of the highest amount and then all the little payments would bounce. When I tried to get them to reverse the overdraft fees ($35 apiece), they wouldn’t budge. Some of the payments that bounced were for as little as four bucks.
Keep up the great work exposing the bad guys!
Along with having a checking account comes responsibility and personal accountability. If you had enough funds in your account in the first place then none of the payments would have bounced, including the one for four dollars, correct?
Webster Bank has another deceptive practice to garner overdraft fees. Say I have a balance of $900 in my checking account and I deposit a check for $700, then I write a check for $600. Webster will charge me an overdraft fee of $35 for incificient funds, even though I have enough to cover the check I am writing. They claim that my $900 must first cover the $700 dollar check I deposited, even though I am not withdrawing any of that amount, and that I now only have a $200 balance, thus incurriung an overdraft fee. I will then be charged another $35 on top of that should the check I deposit bounce. I also assume the writer of the check will also be charged a fee by Webster as well.
That doesn’t make any sense whatsoever. What kind of check is it?
I have suffered the consequences of this overdraft fee and if there is a class action suit on Webster Bank I would like to know how to become part of it and what steps to take.
Webster Bank is ridiculous with the fees they charge…yeah yeah yeah I hear you all about being responsibile and everything….I think for the most part most people are…but stuff happens. Heres one I am dealing with today….I made two deposits on Sunday through the ATM – one for $80 a check and one for $220 all cash. They gave me $100 available. Then this morning I wake up and I have $108 in fees for 3 transactions that went through. They say there is a hold on my atm deposits. The deposit was CASH people. I am having a nightmare with getting back the fees….They extorted half of my CASH deposit for fees. Charged me $36 a pop for 3 transactions….one was for $5.00. That is insane. I have to go to the branch during lunch today to fight with the manager to get my money back. I am ready to leave this bank – which is a pain in the ass when you have everything linked to it…bills, direct deposits etc. IT WAS A CASH DEPOSIT THEY PUT A HOLD ON. CASH!! If I would have walked in on Mon the CASH would have been available. Thats excessive fee charging. This is just another of the issues I have had with this bank. They hold any deposits or credits hostage!!
Yes im still with webster bank and yes im a victim soo all i really want to know is when is webster giving the money back ????
When is webster ganna pay back ??
Yes, the same thing keeps happening to me. I put cash and a payroll check in on Sat. Debits were made on the weekend and a check was written on Mon., which happened to be a holiday, just to find out that my payroll check wasn’t available until WENDS!! Now I have over $150 in overdraft fees! Although my online account showed I had enough or that the check was cleared. My problem continues to be how long they decide to hold checks or cash to make it available. Unsually I have direct deposit, but I am changing banks and stopped my direct deposit, but my morgage was still tied to Webster..but no more. Ive had this account for 25 yrs., and have had nothing but problems since Webster took it over. I’m going to a credit union, no more big banks. There’s a reason they become big banks.
I truely hope someone at Webster Bank is reading all this! EVERYONE!!!!! this is by far the world’s WORST BANK on earth!!!!Take your hard earned money that they are ROBBING YOU OF!!!! and go to a very BIG bank like Bank Of America where you are treated politely, where they dont argue with you, and care about keeping you as a happy customer!! I’ve never seen such bad customer relations as at this bank!!!! Their typical response is always that you are not a responsible person,that is not how you talk to customers!!! They are sooo brainwashed and so are you!!! It is as people are saying. They are experts at setting the whole thing up so as to make you overdrawn. They prey on your humanity. I monitor my account constantly almost daily and I still overdraft because it is as they say that stuff is being done in specific sequences to cause you to overdraft fees deliberately!!!It should not be a fulltime job to keep calling the bank just to make sure your account is okay!!! They are real scum to take peoples money like that! I told one of them that the banks deserve to all fail because of their scumbag tactics!!! The banks ARE the DEVIL OF SOCIETY and the reason our county is in such bad shape!!! As long as we are suckers and tolerate we will continue to be scammed!!!!Save your money, get rid of all the credit cards, and pay cash!!!! Dont become a slave to the banks and they will all go down like they deserve to and things like cars and houses and food will become affordable again for everyone. I remember those days. As long as there is credit and banks and suckers who borrow because we want what we cannot afford, then the cost of just living will be like living will always be beyond the average person’s reach. That is not how I want to live!!!!
DONT WORSHIP THE BEAST, OOOPS I mean bank!!!!!!!!!!!