Peoples Bank Hit with Class Action Over Alleged Overdraft Fee Practices

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A proposed class action alleges Peoples Bank has routinely assessed improper overdraft fees on certain transactions that do not actually overdraw a customer’s account.

Central to the 17-page case are what the complaint refers to as “Authorize Positive, Purportedly Settle Negative” (APPSN) transactions. According to the suit, an APPSN transaction occurs when a customer’s debit card purchase is initially approved by Peoples Bank, but their account later settles into a negative account balance because an intervening transaction depleted the funds therein.

The lawsuit argues that there are always sufficient funds in a customer’s account to cover an APPSN transaction because Peoples Bank initially sets those funds aside and makes them unavailable for use by the accountholder. According to the case, there is no justification for charging fees on APPSN transactions “other than to maximize Peoples Bank’s OD Fee revenue.”

The breach-of-contract case relays that Peoples Bank’s account documents state in “plain, clear, and simple language” that the bank will only charge overdraft fees on transactions for which an account has insufficient funds.

In reality, the suit contends, it is the bank’s practice to “deduct the same debit card transaction twice” to determine whether it overdraws a customer’s account—once when the transaction is authorized and again at the time of settlement. Because the funds for an APPSN transaction are set aside for settlement, i.e., when the bank pays the merchant, they should always be available for that purpose, the case says.

According to the lawsuit, Peoples Bank uses a “secret batch posting process” during which the hold placed on funds for authorized debit card transactions is released “for a split second” and the funds are then re-debited a second time, potentially triggering an overdraft fee.

“This secret step allows Peoples Bank to charge OD Fees on transactions that never should have caused an overdraft—transactions that were authorized into sufficient funds, and for which Peoples Bank specifically set aside money to pay them,” the complaint reads. “This discrepancy between Peoples Bank’s actual practices and the contract causes accountholders to incur more OD Fees than they should.”

All told, the lawsuit claims there is “a huge gap” between Peoples Bank’s overdraft practices as outlined in its account documents and the bank’s actual practices.

The suit looks to represent all United States citizens who were charged overdraft fees on transactions that were authorized into a positive available balance during the applicable statute of limitations.

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