Carver Bank Hit with Class Action Over Alleged Overdraft Fee Practices

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A proposed class action alleges Carver Federal Savings Bank has harmed customers by assessing more than one insufficient funds (NSF) fee on a single transaction and charging overdraft fees on transactions that do not actually overdraw their accounts.

The 27-page lawsuit states that although assessing NSF and overdraft fees is not inherently unlawful, these fees must be charged in compliance with a bank’s contractual terms. Per the suit, Carver has violated the terms of its account documents by charging more than one NSF fee on a single transaction and charging overdraft fees on transactions that do not initially overdraw an account but settle into a negative balance days later—practices the case says are not disclosed in the bank’s contracts.

The lawsuit claims that Carver’s allegedly improper fee practices have financially injured its customers “to the tune of millions of dollars bilked from their accounts.”

Prior to May 1, 2021, Carver’s account documents allowed the bank to charge a single $35 NSF fee on transactions that were returned for insufficient funds or paid despite insufficient funds in a customer’s account, the case says. The suit alleges, however, that Carver has breached the terms of its contracts by assessing more than one fee on a single transaction—first when the transaction is initially denied for insufficient funds and again when the bank attempts to reprocess the transaction.

According to the case, one check, automated clearing house (ACH) payment or other electronic payment is not a new “item” each time it is reprocessed, especially when the customer takes no action to resubmit it.

The lawsuit alleges that Carver’s account documents stated, until May 1, 2021, that the bank would charge one $35 NSF fee per item, and, as the suit puts it, “this must mean all iterations of the same instruction for payment.”

The case goes on to challenge Carver’s alleged assessment of overdraft fees on what the complaint describes as “authorize positive, purportedly settle negative” (APPSN) transactions. According to the complaint, these transactions are initially authorized by the bank, and the funds to cover the transaction are set aside and subtracted from an account’s available balance. The suit alleges, however, that if a subsequent, intervening transaction depletes an account’s funds, Carver will assess an overdraft fee on the initial transaction when it settles into a negative balance days after it was approved.

According to the case, a customer’s account should always have sufficient funds to cover an APPSN transaction given the bank sets aside those funds when the transaction is initially authorized. The lawsuit alleges that despite these funds being unavailable for a customer’s use, Carver fails to use them to settle APPSN transactions and instead re-debits the account during what the complaint describes as “a secret batch posting process”:

The lawsuit alleges this practice is never disclosed in Carver’s account documents, which state in “plain, clear, and simple language” that the bank will only charge an overdraft fee on transactions for which an account has insufficient funds to cover, the suit says.

“In short, Carver Bank is not authorized by contract to charge OD Fees on transactions that have not overdrawn an account, but it has done so and continues to do so,” the complaint charges.

The lawsuit looks to represent all Carver Bank checking account holders in the U.S. who, during the applicable statute of limitations period, were charged multiple fees on the same item. 

The case also proposes to cover all Carver Bank checking account holders in the U.S. who, during the applicable statute of limitations period, were charged overdraft fees on transactions that were authorized into a positive available balance.

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