Class Action Challenges Pendleton Community Bank’s Overdraft Fee Practices

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A proposed class action lawsuit seeks to hold Pendleton Community Bank responsible for its allegedly unlawful practices of charging overdraft fees on certain types of transactions and charging more than one overdraft or insufficient funds (NSF) fee on a single transaction.

According to the 29-page case, Pendleton’s fee practices are not authorized under the terms of its contracts with customers and have allowed the bank to bring in “substantial revenue to the tune of millions of dollars” at consumers’ expense.

The lawsuit first looks to challenge Pendleton’s practice of assessing overdraft fees on what the case describes as “Authorize Positive, Settle Negative” (APSN) transactions. Per the case, APSN transactions occur when the bank initially authorizes a transaction into positive funds but then charges an overdraft fee when the transaction settles into a negative balance days later. According to the suit, this situation can occur when an intervening transaction depletes the funds in a customer’s account after the initial transaction was authorized but before it settles.

The suit argues, however, that because Pendleton sets aside funds to cover the amount of the initial transaction when it is first authorized and makes them unavailable for the customer’s use, those funds should always be available to cover the amount of the transaction when it settles.

“For APSN Transactions, which are immediately deducted from a positive account balance and held aside for payment of that same transaction, there is always enough money to ‘pay’ the transaction—yet Defendant assesses OD Fees on them anyway,” the complaint attests.

Per the suit, Pendleton’s assessment of overdraft fees on APSN transactions is rooted in its use of a “secret posting process” whereby the bank releases the hold placed on funds “for a split second” and then re-debits the APSN transaction a second time, triggering an overdraft fee.

“This secret step allows Defendant to charge OD Fees on transactions that never should have gotten them—transactions that were authorized into sufficient funds, and for which Defendant specifically set aside money to pay,” the lawsuit argues.

The suit goes on to challenge Pendleton’s alleged practice of charging more than one NSF or overdraft fee on a single transaction. Per the suit, when the bank rejects an electronic payment, ACH item or check for insufficient funds, it will charge a $35 fee. The case alleges, however, that when Pendleton attempts to reprocess the same transaction, it treats the transaction as a new item subject to another fee. Per the suit, there is “zero indication” in Pendleton’s account documents that one transaction can be subject to multiple fees.

In fact, the lawsuit claims there is a “huge gap” between Pendleton’s overdraft practices as described in its account documents and the bank’s actual practices. The suit argues that Pendleton has used its discretion to interpret its contracts with customers “in a way that violates common sense and reasonable consumers’ expectations” in order to generate more fees.

The case looks to represent Pendleton checking accountholders who, during the applicable statute of limitations period, were assessed an overdraft fee on a debit card transaction that was authorized on sufficient funds and settled on negative funds.

The suit also proposes to cover Pendleton checking accountholders who, during the applicable statute of limitations period, were assessed multiple fees on an item on their checking account.

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