Provident Bank Hit with Class Action Over Alleged Overdraft Fee Practices

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A proposed class action alleges Provident Bank has improperly charged overdraft fees on transactions that do not actually overdraw customers’ accounts.

At issue in the 19-page case are what the complaint refers to as “authorize positive, purportedly settle negative” (APPSN) transactions, which are described as debit card transactions that are initially authorized by the bank into positive funds but then incur an overdraft fee when they settle into a negative balance days later. According to the suit, this occurs when an intervening transaction purportedly depletes the funds in an account, including those that were set aside to cover the initial transaction.

The lawsuit claims that Provident Bank’s practice of charging overdraft fees on so-called APPSN transactions is not disclosed anywhere in its account documents and amounts to a breach of the bank’s contractual promises to account holders.

“In plain, clear, and simple language, the Account Documents covering OD Fees promise that Provident Bank will charge OD Fees ONLY on transactions that have insufficient funds to cover that transaction,” the complaint states. “In short, Provident 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 lawsuit argues that there should always be sufficient funds in a customer’s account to cover the settlement of an APPSN transaction because Provident Bank sets aside funds for that purpose when the transaction is initially authorized. However, although the bank makes those funds unavailable for a customer’s use, it still assesses overdraft fees on APPSN transactions when an intervening transaction supposedly reduces an account’s balance, the case says.

“In fact, Provident Bank actually authorizes transactions on positive funds, claims to set those funds aside on hold, but then fails to use those same funds to settle those same transactions,” the complaint explains.

According to the suit, Provident instead uses a “secret posting process” during which it releases the hold on funds set aside for a debit card transaction “for a split second” in the middle of the night and then re-debits the account for the previously authorized transaction a second time, thereby triggering an overdraft fee.

The lawsuit contends that there is “no justification for these practices” other than to maximize the bank’s revenues.

Moreover, the suit alleges that there is a “huge gap” between Provident’s actual overdraft practices and how it describes those practices in account documents, which the case says specify that the bank will charge an overdraft fee only when an account contains insufficient funds to cover a transaction.

“This discrepancy between Provident Bank’s actual practice and the contract causes accountholders like the Plaintiff to incur more OD Fees than they should,” the lawsuit argues.

According to the case, Provident’s improper practices have injured customers “to the tune of millions of dollars bilked from their accounts.”

The lawsuit looks to represent Provident Bank checking account holders who, during the applicable statute of limitations period, were charged overdraft fees on transactions that were authorized into a positive available balance.

Initially filed in Hudson County Superior Court on May 2, 2022, the lawsuit was removed to the New Jersey District Court on June 3.

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