Zions Bank Hit with Class Action Over Insufficient Funds, Overdraft Fees

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A proposed class action aims to challenge Zions Bancorporation, N.A.’s alleged practice of assessing more than one insufficient funds (NSF) fee on a single transaction and overdraft fees on transactions that did not actually overdraw an account.

According to the 30-page case, Zions’ NSF and overdraft fee practices have violated the terms of the bank’s account documents, which the suit says fail to disclose to customers that they will be charged fees in such a way. The lawsuit claims the defendant’s customers have been financially injured “to the tune of millions of dollars bilked from their accounts” as a result of the Zions’ failure to adhere to its “clear contractual commitments.”

Moreover, the defendant’s practices, and overdraft fees in general, have a “crushing impact” on persons living paycheck-to-paycheck and disproportionately affect Black and Latino households, the lawsuit stresses.

Zions Bank, which operates through eight brands across 11 states, specifies in its deposit agreement and fee schedule that it will charge a single $35 NSF fee or overdraft fee on a transaction returned for or paid despite insufficient funds, the case explains. Despite representing that a single fee, at most, will be assessed per item, i.e., per check or electronic payment, the defendant, the suit alleges, has charged additional fees each time an item is reprocessed for payment.

The lawsuit argues that a single transaction cannot reasonably be considered to be a new item each time it is reprocessed, and consumers would never expect to be charged multiple fees for such in light of Zions’ representations in its account documents, the case contends.

“Customers reasonably understand, based on the language of the Account Documents, that the Bank’s attempts to reprocess checks or ACH payments are simply additional attempts to complete the original order or instruction for payment, and as such, will not trigger additional NSF Fees,” the complaint states. “In other words, it is always the same transaction.”

Per the case, nowhere in Zions’ account documents does the bank state that multiple fees will be charged for a single transaction that gets reprocessed later.

The lawsuit goes on to challenge the defendant’s alleged practice of charging overdraft fees on transactions that do not actually overdraw an account. The complaint refers to the transactions at issue as “Authorize Positive, Purportedly Settle Negative” (APPSN) transactions.

As explained in the suit, when a debit card transaction is authorized on an account with enough funds to cover the transaction, the defendant sets aside the funds for such, reducing the customers’ “available balance” by the amount of the transaction. Because Zions has already earmarked the funds for payment, the account will always have sufficient available funds to cover the transaction at issue, the suit relays.

The problem, according to the case, is that Zions charges “crippling” overdraft fees when transactions that had previously been authorized purportedly settle days later into a negative balance. The suit says that because the funds to cover the previously authorized transaction were already sequestered by Zions and are not available for the customer’s use, subsequent transactions can incur overdraft fees due to the unavailability of the funds. Although the defendant can choose to charge overdraft fees on the intervening checking account transactions, it is a violation of the bank’s contracts to then charge additional overdraft fees on the APPSN transactions when they settle days later, the lawsuit says. Because Zions kept the funds for such transactions off-limits for the customer’s use, there should always be sufficient funds in the individual’s account to cover APPSN transactions, the lawsuit relays.

Zions’ overdraft practices are allegedly not disclosed in the bank’s account documents and, according to the suit, amount to an attempt to “exploit contractual discretion to gouge accountholders.”

“In short, Defendant 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 complaint charges.

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