Bank Overcharges and Collections

[treehugger1]

In the mix of some of my debt going back a few years I have a couple of checking accounts where I had overdrawn my accounts by $1K - $2K. If I recall these were from debit card withdrawls from the bank's ATM's. The banks eventually closed the accounts and charged off the debt. For a while the debt was attempted to be collected in house. They never sent the debt to outside collections. I recently pulled my ChexSystems record and the banks have derogatory statements. This is no big deal as their reporting has not seemed to slow down my ability to open a checking account should I wish to.

What I find interesting is that there was never any followup collections on these overdrafts. Is/Was it illegal for the banks to allow one to withdraw up to $2K from an atm even though one had only $25 in an account? The banks clearly allowed this. There is NO MENTION related to overdrafts such as these in my account agreements, other than the ususal "consumer will be responsbile for other fess, etc." I paraphrased the last, but you get it.

I have noticed that under the new regulations, one has to opt in for the ability to overdraft your account. However, I can find no information from any major banks as to an agreement as to how one is supposed to pay back the overdrawn account. The bank agreements state that the account will be closed after 45 - 60 days of negative overdraft balance, but I can't find a SINGLE WRITTEN piece of information that relates to how much time, etc one has to pay back the arrears if they do overdraw their account. So, your account gets closed and you are reported to Chexsystems. What other actions can they take? Why don't they take such actions? Are the banks still gambling that consumers will use their checking accounts like payday loans and folks will fork over all the fees? They eat the amount that they cannot collect upon? Do they have no contractual claim to such money "loaned?" It is so freakin' strange. I can't see any claims of fraud as there is no contract sugsting how,what, when etc, one is supposed to make good on their account. The punishment for failure to bring your account current semms to be a report to ChexSystems. There is no report to the CRA's. Nor, do there appear to be lawsuits related to this issue. Is there no true contract?

I'm just curious. And this seemed like a topic that folks might be interested in. Please forgive my typos.

[Freddy03]

Well I am including an overdrawn checking account in my BK. The overdrawn balance was org about $800 it is not up to $1500!! Because they keep processing old auto payments still trying to collect. I have paid them already with my new account but every couple of days they keep trying to process the payment. So I have racked up $700 in NSF/Return fees. I have called them and asked them to close the account but they refuse b/c it's negative....lol You would think after 45 days they would close the account already. I have just started receiving phone calls from them but have unanswered them. I'll wait until they leave me a message before I tell them I'm filing.

But this process baffles me!

[treehugger1]

Well, of course one cannot close an account with a negative balance. Such an account should remain active for WhoTFKnows. ROFLMAO!!!!! This is really a case of the tail wagging the dog!

And, I'm not really talking about the fees. I'm trying to understand why they don't sue over these accounts that are overdrawn due to repeated applications of a debit card at an atm. I guess I'm not too sure about any contractual obligation. In fact, if such is a "loan" then I would assume there are some truth-in-lending laws that apply. I never received any information related to cash withdrawals from an ATM using a debit card where your account can go thousands of dollars in the negative. I'd all but forgotten about these accounts until I pulled my Chexsystem report. One account was written off 3 years ago. The other not quite as long. Other than the chexsystem report, there is no, nada, zilch, zippo, collection actions. Strange, but perhaps there is no legal leg to support collections on such activity.

Why on earth would any bank allow thousands of dollars of ATM overdrafts unless the true risk of those who walk away from the debt is reasonable compared to customers who continue to use their debit cards and ATM for overdrafts; payday loan style? Maybe I answered my own question, but I would love to hear other's experience with cash overdrafts using debit cards at ATMs. Is there little or no legal recourse in most states?

[backtoschool]

Chexsystems is the big stick they use to try to get you to pay the account off. It used to be really difficult (pre internet banking) to open an account if you were in Chexsystems. But now, with many internet banks using other services instead of chexsystems, it is easier to open an account even with overdrawn balances and a negative chexsystems report.

In some states, if you actually wrote checks for the money you didn't have in the account, they could charge you with a felony. But most people don't write bad checks so much as overdraw atms, etc...

Banks have insurance to cover their losses, so really no one is out any real money when the account is overdrawn. Also when there are large negative balances, they are often that large because of nsf fees and repeated attempts to withdraw the money.

Banks make so much money on nsf fees, they actually want you to overdraft. Writing off a certain percentage of the losses is a small price to pay to get $35 for an account that is $1.00 in the red.

Just some thoughts on the subject....

[treehugger1]

BacktoSchool, I didn't stop to think about how things "used to be." The old philosophy of returned checks and felonies, or at least "treble damages" was probably enough to discourage folks form writing checks for money they did not have. However, the check laws protected the third party merchants, etc.; not the banks. An ATM withdrawal is a direct charge against the bank. It is no wonder the banking industry needs to tighten down on the good account holders. Their overdraft fee-based profits have been reduced.

I still believe there is some other issue related to the lack of lawsuits for such overdrawn accounts; some kind of non-contractual issue.

[WhatMoney]

treehug, what bank allowed you to withdraw such large amounts on your debit card without a balance? I never even considered doing that - can't say I've ever used a debit card to overdraw a checking account in my life.

However I did have a $1000 overdraft protection with WAMU, and had three accounts all at the same local branch. There was a month when I used the entire $3000 overdraft line to write checks for rent and bills. This was not a credit line, just their normal overdraft and pay a big fee plan - the most generous check advance system I could find. I think the overdraft fee for writing a $1000 check was around $30. It saved me from threats of eviction for about 9 months.

My social security check would arrive around the 15th to 20th and the bills were due by the 3rd. My direct deposit SS check always covered the overdrafts, so I just paid the fee and WAMU was thrilled that I was paying effective annualized triple digit interest rates for borrowing money for 2 weeks every month. I finally stopped the cycle when a large class action lawsuit (that killed my business) finally came through with a settlement check.

I never had any fear that WAMU would not honor by checks and bill pays up to the $1000 limit, since I always paid off the balance within their 10 business days before they would take any further action. My ChexSystem report is lily white clean.
I wouldn't trust the banks to do this today. None that I know of today have such a generous check advance policy as WAMU did, and of course they are history.

[Freddy03]

treehug, what bank allowed you to withdraw such large amounts on your debit card without a balance? I never even considered doing that - can't say I've ever used a debit card to overdraw a checking account in my life.

However I did have a $1000 overdraft protection with WAMU, and had three accounts all at the same local branch. There was a month when I used the entire $3000 overdraft line to write checks for rent and bills. This was not a credit line, just their normal overdraft and pay a big fee plan - the most generous check advance system I could find. I think the overdraft fee for writing a $1000 check was around $30. It saved me from threats of eviction for about 9 months.

My social security check would arrive around the 15th to 20th and the bills were due by the 3rd. My direct deposit SS check always covered the overdrafts, so I just paid the fee and WAMU was thrilled that I was paying effective annualized triple digit interest rates for borrowing money for 2 weeks every month. I finally stopped the cycle when a large class action lawsuit (that killed my business) finally came through with a settlement check.

I never had any fear that WAMU would not honor by checks and bill pays up to the $1000 limit, since I always paid off the balance within their 10 business days before they would take any further action. My ChexSystem report is lily white clean.
I wouldn't trust the banks to do this today. None that I know of today have such a generous check advance policy as WAMU did, and of course they are history.

I would do the same thing with WAMU. When it changed to Chase that overdraft protection plan disappeared. It was helpful and I really went past a day or two being overdrawn. Now I can't even charge a coffee if the money isn't in the bank.

A few banks have teamed up and started their own EWS - Early Warning Systems. Similar to Chexs system. If you are reported to EWS it will prevent you from opening a new checking account. I'm surprised with my overdrawn account I haven't been reported yet. But my account hasn't been charged off yet. I did open 2 other checking accounts just incase one dumps me

[treehugger1]

WAMU was one that allowed me to withdraw $1K on debit card. When I couldn't pay it after 45 days, they closed the account.

[lovemybugs10]

This happened a couple years ago, so I know laws have changed. I had overdrafted and had fees around 300 bucks. I just left the bank account sitting and went cash. Then a couple months later opened an account with another bank. A couple weeks after that the new bank froze my account because of the overdraft on the old bank. I couldn't touch my current account until I paid the old one off. In full.

[TheExpert]

Its obvious that none of you have heard of EWS aka Early Warning Systems......

[Freddy03]

Its obvious that none of you have heard of EWS aka Early Warning Systems......

Check a few posts above you. I know all about EWS.

[keepinitreal]

Its obvious that none of you have heard of EWS aka Early Warning Systems......

Were you BubbaJoeBob before you were TheExpert?

[backtoschool]

Were you BubbaJoeBob before you were TheExpert?

I'm glad you said it first. I have been thinking it since post number 1.

[catleg]

That's funny TH. Must be a Wamu thing. As I understand it their foray into banking was kind of an afterthought.
I've been doing the opposite lately. Hitting banks for the ridiculous new account bonuses they're offering. PNC was the toughest, they had some kind of flag in their system that needed someone in the branch to override with a call to the help desk. I think they were possibly flagging my account because of my active ch13 BK. Not sure why it would matter to them, they weren't even a creditor of mine. They do seem to use something different than the other TBTF banks I've successfully opened accounts with.

[TheExpert]

Were you BubbaJoeBob before you were TheExpert?

Dont know any bubba's, but I have more knowledge on credit repair than those who merely think they do. Hence the name TheExpert.