Lawsuit: Citizens Bank Charges Unlawfully Excessive Interest for Overdrafts

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A proposed class action filed in Massachusetts hopes to take defendant Citizens Bank, N.A. to task over its alleged practice of charging checking account customers exorbitantly high interest in violation of the National Bank Act. According to the complaint, Citizens Bank charges a $35 fee to customers who overdraft their accounts. While this is nothing out of the ordinary, the lawsuit claims that when a customer presents a check for payment connected with an overdrawn account and Citizens chooses to advance the deficiency to the customer, the bank will charge a “sustained overdraft fee” should the customer not repay the advance “within a very short period.”

Once checking account customers enter into “sustained overdraft fee” territory, they are allegedly hit with an interest fee that’s disguised by the bank:

“The so-called ‘sustained overdraft fee’ is, in reality, interest that Citizens Bank charges to its customers for the use, forbearance, or detention of the money it has loaned to its customer by advancing the funds necessary to pay the overdraft,” the lawsuit alleges.