TD Bank Hit with Class Action Over ‘Improper’ Overdraft Fee Practices

New to ClassAction.org? Read our Newswire Disclaimer

A proposed class action claims TD Bank has wrongfully charged overdraft fees on transactions that did not actually overdraw customers’ accounts.

The 21-page lawsuit says that although TD Bank states in its account documents that it will charge overdraft fees only when a customer has insufficient funds to cover a transaction, the bank, in practice, assesses overdraft fees on some transactions that were at one time approved but settled later into a negative balance. Per the suit, TD Bank’s practice of assessing overdraft fees on what the complaint calls “Authorize Positive, Purportedly Settle Negative” (APPSN) transactions has caused customers to be charged more in overdraft fees than they should have been.

The case contends that the bank’s overdraft practices amount to “exploit[ing] contractual discretion to gouge accountholders.”

The complaint states that APPSN transactions are debit card transactions that are initially authorized on an account with sufficient funds to cover the transaction. At the time the transaction is made, TD Bank sets aside the amount to cover the transaction and subtracts that amount from an account’s available balance, the suit relays. The case argues that the account should thus always contain sufficient funds to cover that particular transaction given the bank has already set the money aside.

The lawsuit alleges, however, that TD Bank will sometimes assess “crippling” overdraft fees on these transactions when an intervening transaction depletes an account’s balance:

According to the suit, TD Bank, unbeknownst to customers, runs each debit card transaction twice to determine whether to assess an overdraft fee—both when the transaction is initiated by the customer and when it settles, often days later. The case explains that during TD’s nightly batching process, the bank releases the funds it held to cover a particular debit card transaction and allows them to be used for other purposes, which thus depletes a customer’s account and subjects them to additional overdraft fees at the time the previously authorized transaction settles. 

Not only is this practice “unfair and unjust,” the suit says, but it contradicts the “plain, clear, and simple language” in TD Bank’s account documents, which state that overdraft fees will only be charged when an account has insufficient funds to cover a transaction. Per the case, TD Bank has misrepresented “the true nature” of its overdraft practices and abused its contractual discretion to take advantage of customers.

“There is no justification for this improper practice, other than to maximize TD’s OD Fee revenue,” the complaint charges.

The case looks to represent TD accountholders who, within the applicable statute of limitations period, were charged overdraft fees on APPSN transactions in a TD checking account.

Initially filed in New York in November 2021, the lawsuit was transferred to New Jersey on January 20, 2022.

Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s newsletter here.