Trustco Bank Hit with Class Action Over Alleged Overdraft, Insufficient Funds Fee Practices

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Trustco Bank has improperly assessed multiple overdraft and insufficient funds (NSF) fees on single transactions in violation of its contracts with customers, a proposed class action alleges.

According to the lawsuit, Schenectady, New York-based Trustco has attempted to “maximize[] its already profitable fees” by charging multiple NSF fees, or one NSF fee followed by an overdraft fee, on individual transactions that are later reprocessed. The suit alleges, however, that the bank’s contract does not disclose “this counterintuitive and deceptive” fee practice, and instead promises that the defendant will do the opposite.

“Nowhere do Trustco and its customers agree that Trustco will treat each reprocessing of a check, electronic payment item, or ACH item as a separate item, subject to additional fees,” the lawsuit reads.

The defendant’s customer accounts are governed by the “Trustco Bank Retail Online Banking, Bill Paying and Mobile Banking Agreement and Electronic Fund Transfers Disclosure Agreement,” the case says. Per the suit, the contract states that when a customer has insufficient funds to cover a check, electronic payment or ACH item, the bank can either pay the item and charge a $36 fee or reject the item and charge a $36 fee.

“The Contract promises that, at most, ‘a fee’ (singular) may be assessed on ‘an item’ (singular),” the complaint stresses.

The lawsuit alleges, however, that whenever Trustco reprocesses an electronic payment item, ACH item or check after initially rejecting the transaction due to insufficient funds in the account, it treats the transaction “as a new and unique item” subject to another fee. While the bank’s contract allows for only one fee to be charged per item, Trustco has routinely and as a matter of practice charged multiple fees for just one transaction, the case claims.

According to the complaint, the there is “zero indication anywhere” in the bank’s account-governing contract that one “item” is eligible to incur multiple fees. Moreover, the same “item” on a customer’s account “cannot conceivably become a new one” whenever it is rejected for payment and then reprocessed, especially when an accountholder takes no action to resubmit it, the suit argues.

The reprocessing of an item, according to the complaint, is “simply another attempt to effectuate an account holder’s original order or instruction.”

Per the lawsuit, customers understand that any given authorizations for payment constitute one “item” as the term is used in their Trustco contracts and therefore reasonably expect the bank will not charge more than one fee for a rejected transaction.

“In sum, Trustco promises that one $36 fee will be assessed on an item, and this term must mean all iterations of the same instruction for payment,” the complaint states. “As such, Trustco breached its contract when it charged more than one fee per item.”

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