Unfair Overdraft Fees TD Bank Canada

Unfair Overdraft Fees TD Bank Canada

It has been alleged that TD Bank Canada has been processing its customers’ fees in a highest-to-lowest sequence, rather than in the order in which the transactions were made. This transaction sorting causes the customer’s account to be depleted more quickly, thereby maximizing the number of overdraft fees the bank can charge.

Unfair Overdraft Fees Lead to Multi-Million Dollar Suits in U.S.

A number of major banks in the United States have been hit with multi-million dollar lawsuits claiming that they engaged in this same unfair practice of transaction sorting. Many of these suits have been consolidated in a federal court proceeding in Miami. More than a dozen banks have agreed to multi-million dollar settlements in regard to unfair overdraft fees including the following:

  • Bank of America: $410 million
  • Citizens Bank: $137 million
  • Chase: $110 million
  • PNC: $90 million
  • TD Bank: $62 million
  • US Bancorp: $55 million

While litigation has awarded compensation to aggrieved customers, it has also allowed these practices to be subject to a much higher scrutiny. The Consumer Financial Protection Bureau announced that it would be investigating the overdraft practices of several major banks. In addition to transaction re-ordering, the investigation will also focus on confusing customer communications; misleading marketing materials; and the unfair impact on low-income and younger consumers.

Example of Transaction Re-Ordering

To demonstrate how transaction re-ordering works, assume a customer has $100 in their checking account. Throughout the day, the consumer makes five $20 debits, followed by an $80 transaction at night. If the bank processed the transactions in the order in which they were made, the customer would only be charged one overdraft fees for the $80 debit; however, if the bank processed the $80 transaction first – even though it was made later – the consumer would be charged overdraft fees for four of their $20 transactions, even though they were made earlier. If the bank charges $35 per overdraft fee, this consumer would be charged $140 rather than $35.

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