Question About Bank Overdraft Charges

[Aurora D]

Does anyone work for a bank? For the past 2 months my auto debit for my car insurance came out of my checking account early. (Need to call insurance about this). I had a few small debit purchases pending at the same time. Both months the bank, Valley National, took the large insurance auto payment 1st, putting me into overdraft, before processing the smaller debits. This caused me to incur several $35 overdraft fees.
I called the bank to complain. I mentioned that it was illegal(?) for banks to "order" debits from highest to lowest. The bank manager told me since my car insurance wasn't a debit it came from a different department and there is no way for the departments to know what will come out first. Basically, I'm out of luck.
Does anyone know the "rules" on this kind of situation?

 

[goofyfigment]

M&T did the same thing to me. Party city mistakenly charged 300 instead of 30 and immediately reversed it. I had several debits come thru under 10 each and ended up with over 300 in fees. Party city even wrote a letter advising of the error and M&T still refused to refund the fees.

 

[Riverhill]

Hello, I work for a bank. While I do not believe there is a law. Most banks mine included, have changed the way they process debits and credits. We put all credit into the account first and then process debits from smallest to largest to avoid exactly what you are talking about.

The only reason a larger debit could pull first is if it was authorized on an earlier date then the smaller debits, yet withdrew from the account on the same day. An example would be if you bought gas late friday night and on Sat and Sun. have a few smaller debits using your debit card. Because on Friday you purchased the gas and therefore believed you had the funds to pay for it, that debit would be authorized before the others but all would pay out on Monday, the next business day.

I hope this helped. I would stop the auto deduct from your insurance company to avoid this in the future and perhaps find another bank that better fits your needs.

 

[snoodledoo]

Maybe your insurance is set up as ACH and the debits are on your card? Maybe your bank processes ACH transactions before the card transactions?

At my CU, ACH transactions post early in the morning, and the card transactions are posted as the settlements come through.

 

[POOHsie]

OP's problem is why I don't do any auto-payments. I have an online banking account which covers a bank CC, a savings account and a checking account. I pay out my bills thru the checking account, after my deposits are cleared. I control what date my bills get paid -- not the creditors. Works much better. Another facet of this is to pay for routine items such as gas, groceries or Walmart, etc., with the bank CC, not the debit card. This ensures no forgotten debits show up "by surprise" in the checking account. Then during the month I move money online between savings, checking and CC as needed. Never any overdraft "surprises" anymore. My system requires financial discipline to pay down the CC every month. But overall it puts me in control and works very well.

 

[mcorbo]

Does anyone work for a bank? For the past 2 months my auto debit for my car insurance came out of my checking account early. (Need to call insurance about this). I had a few small debit purchases pending at the same time. Both months the bank, Valley National, took the large insurance auto payment 1st, putting me into overdraft, before processing the smaller debits. This caused me to incur several $35 overdraft fees.
I called the bank to complain. I mentioned that it was illegal(?) for banks to "order" debits from highest to lowest. The bank manager told me since my car insurance wasn't a debit it came from a different department and there is no way for the departments to know what will come out first. Basically, I'm out of luck.
Does anyone know the "rules" on this kind of situation?

I bank at Valley also, they did this to me one time. in one day they applied a bunch of transactions from largest to smallest and I incurred $235 in overdraft fees. These were all debits from my Paypal account. I contacted the bank, and they insisted they do not do largest to smallest that they apply them in the order they receive them. I had to write to the presdent of the bank to get the charges reversed. Since then, i noticed my paypal chrages no are applied smallest to largest.

There was a class action lawsuit against some of the larger banks for doing the same thing.

 

[Keira1387]

I once had a situtation where I schedlued a truck payment through the bill pay center, and the bank took it before it was scheduled to come out. I called and they refunded all fees since it was their error.

 

[mikegood2]

That's also why I don't use auto-payment and set up a calendar reminder to remind me when my payment is due. All it takes is one banking overdraft issue to cause problems.

I still remember, back when I was in college, when I racked up over $100 in overdraft charges because I was 14 cents overdrawn. I tried to explain my situation (statement was sent to my home not my school) and try to get them to only charge me one overdraft fee. The bank manager scolded me and told me that I was an adult and take responsibility. The problem was that she was the individual that told me to set it up that way. Luckily the worked with me, but I closed that account shortly after.

Sent from my iPad mini using DISBoards

 

[bgirldeb]

Does anyone work for a bank? For the past 2 months my auto debit for my car insurance came out of my checking account early. (Need to call insurance about this). I had a few small debit purchases pending at the same time. Both months the bank, Valley National, took the large insurance auto payment 1st, putting me into overdraft, before processing the smaller debits. This caused me to incur several $35 overdraft fees.
I called the bank to complain. I mentioned that it was illegal(?) for banks to "order" debits from highest to lowest. The bank manager told me since my car insurance wasn't a debit it came from a different department and there is no way for the departments to know what will come out first. Basically, I'm out of luck.
Does anyone know the "rules" on this kind of situation?

These are the new rules, and it does not apply to autopay:
http://www.federalreserve.gov/consumerinfo/wyntk_overdraft.htm

I would take the bill off autopay with your insurance company right away and pay it online after you get paid, if that is an option. Maybe they would pay some of your fees if they are debiting before the agreed upon date.

I use BOA bill pay and have to pay my truck loan differently because the bill pay posts the next day even though my bank's bill pay has it scheduled out 4 days. My bank says to have the funds available, so I just wait until the day before payday to schedule it. Something to do with the way the loan company processes ach payments.

 

[JaymeC]

At the CU I work at all of our ACH postings (which is what most automatic drafts are) are debited early in the morning when the computer cycles them through. The debit card items are cleared as the individual companies settle their machines, so really we don't have any control over when anything gets posted. Having said that, for the first time we probably would have refunded most if not all the fees but you would have been responsible for correcting it going forward.

But like everyone's said, I would get away from auto payment with this company unless you know the funds will always be there early. It's not worth the risk going forward.

 

[Sadie22]

Our checking accounts are linked to another account from which money will automatically be transferred to cover any overdrafts. Does your bank not offer overdraft protection in this manner?

 

[Swimalie]

OP's problem is why I don't do any auto-payments. I have an online banking account which covers a bank CC, a savings account and a checking account. I pay out my bills thru the checking account, after my deposits are cleared. I control what date my bills get paid -- not the creditors. Works much better. Another facet of this is to pay for routine items such as gas, groceries or Walmart, etc., with the bank CC, not the debit card. This ensures no forgotten debits show up "by surprise" in the checking account. Then during the month I move money online between savings, checking and CC as needed. Never any overdraft "surprises" anymore. My system requires financial discipline to pay down the CC every month. But overall it puts me in control and works very well.

Same here! I also cancelled overdraft protection so the bank would have to call me if there was a problem instead of just being able to pull from my savings account and add on fees to me. Although I never let my account get below a certain amount to avoid a problem.

Cancel your auto-drafts. They cause problems.

 

[tyniknate]

M&T did the same thing to me. Party city mistakenly charged 300 instead of 30 and immediately reversed it. I had several debits come thru under 10 each and ended up with over 300 in fees. Party city even wrote a letter advising of the error and M&T still refused to refund the fees.

We had the very same problem with Sovereign Bank. They reversed the first two overdrafts, but wouldn't do anything about the other five. Ours was because of a direct deposit that was scheduled to deposit on Thursday night, but didn't deposit until Saturday morning. So frustrating. They, too, took out the big payment first and then the smaller ones. I almost got escorted out of the bank I was so angry!

 

[kim929]

Our checking accounts are linked to another account from which money will automatically be transferred to cover any overdrafts. Does your bank not offer overdraft protection in this manner?

Sometimes people don't have the money in savings to transfer over to cover over drafts.

 

[lilaurora]

Sometimes people don't have the money in savings to transfer over to cover over drafts.

We have a line of credit attached to our checking account to cover any inadvertent overdrafts (we then pay off the LOC). IF for some reason the overdraft is more than the LOC, the additional pulls from our savings account.

 

[tink_n_pooh]

I have worked with Valley as a business (they were a client of mine) and as a bank (both business and personal) and I do not have anything positive to say about them. They are notorious for being the most difficult to deal with in our area

 

[NeverlandClub23]

I worked at a bank as a teller years ago and my current bank also takes items out largest to smallest. My bank's reasoning is that usually the largest items are mortgages or car payments. Things that you would typically want to be paid no matter what. The smaller items aren't always paid (leaving you with a negative balance and a charge on top of it). If you overdraw your account often, sometimes banks will just send the payment back to the company and leave you with the NSF fee. If the bank is going to pay all of the items on your behalf no matter what, then it would make sense to do it smallest to largest. Otherwise, I can see why they would do it largest to smallest.

 

[JB2K]

For the past 2 months my auto debit for my car insurance came out of my checking account early.

And that is reason enough why noone should give any billers unfettered access to their personal bank accounts.

Better alternatives that one has control over is paying the bill in real-time at the biller's website, making use of your bank's bill pay service (which in most banks, is free), and, of course, writing a good, old-fashioned check.

 

[TheRustyScupper]

. . . At my CU, ACH transactions post early in the morning, and the card transactions are posted as the settlements come through.

1) There IS a July-2010 law against taking talking largest charges first.
2) For debit card transactins and checking accounts,
. . . ACH charges are taken overnight when the creditor processes billing
. . . debit card purchases/charges are taken at the time they are completed
3) Thus, a huge ACH can really upset your whole account.
4) This is one of the MANY reasons we refuse to use a debit card.
5) In your case, you are out of luck.
6) Unfortunately, you are going to have to pay the $35 charges.
7) Count this up as a "learning experience".

 

[Colleen27]

Maybe your insurance is set up as ACH and the debits are on your card? Maybe your bank processes ACH transactions before the card transactions?

At my CU, ACH transactions post early in the morning, and the card transactions are posted as the settlements come through.

That was my first thought too because that's how my bank orders things. ACH comes out first (which is how AAA auto-pay is processed, don't know about others), then debit card transactions. I just switched ours to pay-in-full when the policy renewed because I don't like having the automatic payments coming out, but with so many companies offering discounts on the policy if you sign up for it I can understand why people put up with it.