Cadence Bank Facing Class Action Over Allegedly Illegal Overdraft Fees

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A proposed class action lawsuit accuses Cadence Bank of wrongfully charging a $36 overdraft (OD) fee on certain debit card transactions, even when an account has sufficient funds available to cover the charges.

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The 25-page lawsuit alleges that the bank, by assessing improper OD fees, has plainly breached its customer contracts, which do not expressly permit such charges. The suit also claims the contract misleads accountholders with regard to Cadence Bank’s transaction processing and OD practices.

“In sum, there is a huge gap between [Cadence Bank’s] practices as described in the Contract and [its] actual practices,” the case contends.

Specifically, the complaint takes issue with the bank’s alleged practice of assessing OD fees on “Authorize Positive, Settle Negative” (APSN) transactions. In general, the bank maintains a running, real-time account balance for accountholders and tracks what funds are available for their immediate use, the filing says. When a customer makes a purchase with a debit card, the defendant sets aside the necessary funds to cover the transaction, subtracting the money from the consumer’s available balance, the suit states.

As a result, a customer’s account should always have sufficient funds to cover a transaction since Candence Bank held the money aside, the filing relays.

However, despite setting aside sufficient funds for a given charge at the time it is made, Cadence Bank will nevertheless assess a “crippling” OD fee on the same transaction “when [it] settle[s] days later into a negative balance,” the lawsuit alleges.

Per the suit, a negative account balance can occur in the event that any “subsequent, intervening transactions are initiated on a checking account.” A subsequent transaction will then be “compared against an account balance that has already been reduced to account for pending debit card transactions,” the lawsuit explains.

“Therefore, many subsequent transactions incur OD Fees due to the unavailability of the funds held for earlier debit card transactions,” the case continues.

The complaint claims the bank misrepresents its OD practices, as its contract with accountholders provides that “transactions are only overdraft transactions when they are authorized and approved into a negative account balance,” which the filing argues is not true of APSN transactions.

“For APSN Transactions, which are immediately deducted from a positive account balance and held aside for payment of that same transaction, there are always sufficient funds to cover those transactions—yet [Cadence Bank] assesses OD Fees on them anyway,” the lawsuit asserts.

According to the suit, no express language in any Cadence Bank document allows it to assess fees on APSN transactions, nor is there any justification for its “unfair, deceptive” OD practices, aside from its own financial benefit.

“APSN Transactions only exist because intervening transactions supposedly reduce an account balance,” the case contends. “But [Cadence Bank] is free to protect its interests and either reject those intervening transactions or charge OD Fees on those intervening transactions—and it does the latter to the tune of millions of dollars each year.”

The lawsuit looks to represent anyone who, during the applicable statute of limitations period, was a Cadence Bank checking accountholder and was assessed an overdraft fee on a debit card transaction that was authorized on sufficient funds and settled in the same amount for which it was authorized.

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