can a bank legally do this

I don't know about legal, but it's common. The procedure used is to credit all deposits first, then pay all withdrawls from largest to smallest. The rationale presented by the bank is that the largest withdrawls are probably the most important to the consumer (e.g. mortgage, car payment, etc.) and thus are paid first. Of course, you and I both know that kindness is surely a distant second to profit when it comes to the bank's motives.

 

I have suspected that practice in the past, but unlike you, had no proof. Wow! Who knew? Whether it is a practice designed to boost nsf profit or simply a sort from highest to lowest based on perceived importance, it is still worthwhile information.

 

Hey, I got you beat...

My *FORMER* bank decided to provide false "AVAILABLE" BALANCE information in order to rack up NSF fees on DEBIT card transactions that they PRE-AUTHORIZED, certifying that funds WERE AVAILABLE for the transaction.

The bank manager actually thinks that I'm dumb enough to believe that *EVERY* single transaction was a non-pre-authorized transaction, despite the swiped transactions showing that they had authorized the transaction.

 

I know my bank does this. I have automatic payments set up for the same day as my deposit. They will charge a fee even if I can prove my deposit went through first. It's crummy, but I can't do much about it.

 

Actually, it shouldn't matter when they were "time stamped", if done over the holiday weekend, they all would process as of the "end of day" on Tuesday. This is known as "end of day processing", it is in line with the above of processing deposits first, then withdrawals.

Are you saying you made a deposit during this time period? I'm not sure how you deduce the extra NSF charge(s) based upon these ATM transactions. If you got the cash, then the funds were available, unless a deposited check was returned for NSF, or you "floated" a check through the weekend.

 

bizwiz:

The problem is that the order of the processing is done SPECIFICALLY cause the most fees possible.

For instance, if there is $251 which is supposedly available.

The consumer does 5 debit card/ATM transactions, they order them so that the largest ones come first, so that as many smaller transactions get returned for NSF; irregardless of the order that the transactions occurred.

So say the bank is reporting the $251; but they're falsely not disclosing a $25 pre-authorized transaction, the consumer has $226 which is TRULY AVAILABLE. If the consumer does transactions in the amount that the bank claimed was available, they get hammered.

So, if the consumer went to McD's twice, got a value meal, which totaled $5, bought other miscellaneous purchases, $15 in groceries, and $25 in gas, then made an ATM withdrawal of $200. They would pull the $200 out before doing anything else, just to deplete the cash reserves before pulling out the miscellaneous purchases, so only a few of them would go through before hitting NSF, and racking up hundreds in NSF fees.

Hey at $40 (which is a number which I've recently seen as the NSF fee for one bank; but I can imagine some wanting to rake in more than that at a hit) or more a pop, they're netting the most money possible for their coffers.

They would put the withdrawal and the gas through, and stamp the others NSF; but they do have to pay them out, so the consumer has -$25 with just the transactions, and $120 in NSF fees; because the bank committed fraud by certifying incorrect information regarding the true available balance; if they would do the transactions in order, they would only have $40 in NSF fees.

Which is better for them.

BTW: I even had someone at my *FORMER* bank 'confess' (too bad it wasn't in writing), that they do not deduct pending debit card transactions from the AVAILABLE balance, and instead hide them in another screen, so that even their reps won't see them, unless you SPECIFICALLY ask them to look at that screen, which requires that the consumer actually know that that screen exists in the first place.

Unfortunately in my case, thanks to a medicine which I was on over ten years ago, I have the short-term memory of a mouse. There's a reason why Office is my friend, between Word, Excel, and Outlook, everything has to be stored on the computer for me to remember it. Which forces me to rely that my bank is providing me with 100% complete, and accurate available balance information.

Bizwiz: See if your bank does the same, if you did a debit card transaction today, tomorrow morning look to see if the available balance matches the ledger balance, if it does, guess what, they're providing false available balance information, specifically to force false NSF fees to be incurred.

 

I understand the scenario you're laying out here, and my bank posts based upon the processed transaction. By this, I mean that some debit card transactions are processed immediately, and it is "cleared" immediately. Other "debit" transactions are processed like a "credit" transaction, they are "authorized" (which means at that moment the "available balance" is sufficient to cover the charge/amount). On some transactions, my bank will "deduct" the amount from "available balance", but then removes it until it is posted from the merchant.

I haven't seen any banks that "hold" the authorized amount of a debit transaction, similar to what you are stating.

However, it depends upon the timing of the transactions, as banks are supposed to process "end of day". In other words, you could "technically" overdraw your account during the day, and if you made a cash deposit before 2:00PM, the overdraft should be covered. There are a lot of details in here, and many "clearing rules" to deal with, but this is a general rule. As you are not overdrawn until the transaction is posted. I have caught some banks with this, fighting for friends and similar incidents.

What kills most people is keeping up with what the "available balance" really is, and keeping the "register" accurate. I have helped many friends "balance" their checkbooks, and I am amazed at what they do not record. ATM fees, transaction fees, service charges, etc. These often trip an account into being overdrawn, and the domino effect of NSF charged is exponential.

You really cannot go by the "available balance" as generated by your bank, on either an ATM slip, or on-line, or especially a bank statement. An accurate register balance is the only way to go.

The other danger is the "pre-authorized" amounts, if your "debit card" is run as a "credit card" you may hit a larger amount being "authorized" than you pruchase. For example, at gas pumps, they typically "authorize" for $40-$50, though you may only purchase $10!! This is where the "false NSF" hits come in, and the "screens" you speak of.

 

In a situation like this, I would ask to see the "posting" of the transactions, and have them define which transaction(s) caused the NSF.

Direct deposit "funds" are usually "in the bank" the night before the deposit date. (They are technically there on the banking day date). Unless the bank has some loophole about "availability" of funds, I would challenge any charge. The rub comes if your bank "claims" the deposit funds are "not available" for 24 hours of clearing time (which would put it at after 2:00PM of your deposit date, or the next banking business day). Banks sometimes also "clear" an electronice payment out of your available funds, though the payment amount has not "fully" cleared the banking system. This is where you have to watch the banks!

Again, an "end of day" processing should take care of this. Also, ask them their differentiation between "available balance" and "good funds" in your account.

 

Every bank that I have did include pending debit card transactions into the AVAILABLE balance; once they've authorized a purchase it isn't available, until after the 5-7 business days which are typically allowed for the transaction to be finalized.

And they also listed the amounts of ALL pre-authorized transactions in the online banking system.

In this case, I wouldn't have had a problem, HAD they disclosed that the available balance doesn't include $x.00 in pre-authorized debit card transactions. They have it in their system somewhere, they need to provide the consumer with the accurate information. At least if they disclosed the available balance and the PENDING charges information, there would be a way to know the EXACT AVAILABLE BALANCE, instead of being told one thing (and them approving transactions based off of) an inflated AVAILABLE BALANCE.

Bizwiz: You asked how they got the money out, if the bank now says it didn't exist. THIS is it. The authorized the transaction off of the inflated AVAILABLE BALANCE, and not the true AVAILABLE BALANCE.

 

I view my banking on line and my bank has "real time data" it shows debt card transactions and their amounts pending (and they are subtracted from my available balance immediately) in an area titled pending/today's transactions and it lists each purchase and the amount the only amounts that appear to be a little different are restaurants and gas purchases. I depend on looking at this almost daily just to keep my records balanced.

 

I work for Fifth Third Bank. Most banks do post items from largest to smallest amounts first, deposits being credited first. Its in our policy book that every new account holder gets.

When we give customers their balance, we give them their actually available balance (pre-authorized items being deducted out). Because we do go by available balance when determining overdrafts (which is actually new, a few months ago we did not do it that way). If your bank doesn't then I seriously urge you to reconsider where you bank.

 

I assume you've spoken with the bank regarding these fees and the transactions behind them. I would try to elevate your conversation to a higher level of management; ask them to "walk you through" their accounting and posting of the transctions. In short, they cannot have it both ways.

Each state has a banking commission, and the Attorney General of your state is probably the best place to start.

You also definitely need to find out what they are reporting to Chex Systems (the banking industry "credit report"), as they will have you in a "catch-22". You may want to close your account(s), but if they report multiple overdrafts, then you may find it nearly impossible to open another account at another institution. THIS IS CRITICAL TO CHECK ON!

I think your best bet is to try and negotiate the fees with the bank, and negotiate NO reporting.

 

I personally try to give them an opportunity to "do the right thing", so first I would mail to their dispute address, a written dispute of the fees, and provide copies of the receipts from their ATM showing that the amount of the transactions were being reported as being available.

I posted the EFTA section in this post http://consumers.creditnet.com/Discussions/credit-talk/t-checking-accounts-rights-notice-66169.html

Under EFTA, if they receive the dispute, they have 10 (20 if it's a new account) days to respond before they are REQUIRED to replace the disputed funds in the account. (45 days are allowed for the dispute to complete, but they MUST refund the fees, if it takes more than the 10 days.

They are required to provide a written response to the dispute within 3 days of their completion (IF THEY DISAGREE with the dispute), so if they didn't deposit the funds back to the account in 10 days, allow one-week for an answer, then bump it up as high as you can up the food chain.

Once I've given them the chance to do the adjustments, or respond to the dispute; I'ld bump it up to the regulatory agencies, mentioned by Bizwiz.

In my case, I bumped it to their General Council, Branch Manager, and the Manager at the Regions main bank. (A month after the WRITTEN dispute was received) Including a draft of a suit, including but not limited to EFTA violations, and including reporting false credit information, if they failed to notate that it was disputed, for their claims to have reported it to ChexSystems. Even if they reported it to ChexSystems, it's continued collection activity on a disputed sum, before the completion of the dispute.

I ordered my CS report the same day that I got their letter, which informed me that they are supposedly starting to report to ChexSystems, even before calling them so they couldn't change it.

But at least I provided an example of how the bank would give out money which is not available.

 

Good advice Jam, always the best idea to "follow the process"!

 

I suspect that my bank is the same as the OP or at least has the same policies so this thread has been very informative.

Here's my twist. As it happened many months ago, it's been resolved but I thought I'd share so those whose banks have similar policies are aware that it might happen.

I have an available account balance (which items mysteriously come and go from) and a seperate link to the pending charges, which are already deducted from the available balance. Luckily, if we purchase gas, it comes through as $1 until the real amount really processes. I say lucky because I'd rather see the $1 and know there's more coming out than wonder how much they held aside.

However, if a company processes our debit card as credit and messes up and then starts over, we get a ghost charge in our pending charges so it looks like we made two purchases instead of one. While it removed the money from our available balance, once the original charge clears it disappears and the money becomes available again. The trouble with this is that if this ghost charge is more than the available balance, it starts the whole nsf process and the largest amount comes out first... etc. etc.

This has happened twice to us. The first time, the bank helped us out the best they could. My hubby's check had been deposted the next day and they took almost $400 in nsf fees out of it. They returned the fees, but not until the original charge processed and the ghost charge fell off so they knew it was not real. We had to wait several days to get our much needed money back. The second time, the bank was not so helpful. They returned some of the fees but not all of them.

Like I said, water under the bridge now but something to watch for.

IMO, banks should just process everything as it comes in and goes out. At least the time stamps can create accountibilty.

 

My son got into a real mess a whle back. Some banks offer overdraft privilege up to a certain amount. My son had this up to $400 but didn't know it. He kept using his debit card thinking if it went through he must have the funds ( 18 years old, new to the rules of life!) Ended up way overdrawn plus NS fees. The banks should really make sure people understand how the account works when they open a checking account.

 

I hope this post is not taken the wrong way, but with reading all the activity around this post, there has been something bothering me about it.

There is a similar root cause to credit repair overall here; and that is a lack of financial management and perhaps behavior that needs to be changed.

First, banks can "legally do this" re: NSF charges, and we all must take accountability for managing our checkbooks. It is our responsibility to not spend more than we have,the same basic problem that gets us into trouble with credit.

I can appreciate the frustration and anger of getting hit with the multiple NSF charges, but what caused them? When I see $800 in withdrawals over a holiday weekend, it hints of a lack of financial discipline.

I am certain that it was only a small amount that actually put you into "overdraft". I am also fairly certain that if you look back, you could find ways to have not needed, or spent, $800. My guess is that you knew you were very close on your account, and your "gut" was telling you there might be a problem.

Again, it all comes down to managing your personal finances, and knowing what "you" can spend, in brief, a budget. My bank may say that I have a $2,000.00 available balance (of good funds) at this moment, but if I know I have payments of $1,950.00 to pay, then "I" have only $50 "available".

Outside of a merchant or bank posting error, or a deposited returned for NSF, there is no reason to overdraft an account. I set my checkbook register on an Excel spreadsheet, that can reconcile with my bank's posted available balance instantly. I also use the register as a cash flow forecast and budget tool, to ensure everything will be covered.

And I do understand about the incidents of life that can cause havoc; my wife is not good with these things either, and I have to manage around her. I compensate for her "blips" by padding my account with a set amount of money that I do not add to my register. I create my own "overdraft protection" within my checkbook.

NSF fees, and other "penalty" fees are the biggest waste of money. You must be aware of where you are in "cash flow" to prevent these fees and penalties. It is also much easier in this technological age of on-line banking, and software, to better track your accounts.

I do not mean to send the wrong message here, but we all must take responsibility and accountability for managing our personal finances. In helping many other people, I have seen a strong correlation that credit report/debt issues and overdraft issues. They share the same root cause of spending more than we have or make.

Peeper, I ask you to look back at the holiday weekend, and truthfully examine whether you NEEDED $800.00 in cash, besides the other debit transactions. Did you know how much "spendable" money you had for the holiday weekend? I would just hate to see you go through this again.

 

bizwiz: Personally, I DON'T disagree with NSF funds, IF the NSFs are incurred based exclusively on their actions, and not the actions of the financial institution. As in my case, I relied on the exact information provided by the financial institution; when the banks own employee's have to be told by the customer to look at a special screen that no customer would even know exists to provide accurate information, the bank is doing something wrong.