Several nationwide class actions have been filed against some of the countries largest banking associations.  The named plaintiffs allege the banks’ practice of reordering electronic transactions is deceptive and illegal, despite the banks’ customer agreements that state they can process customers’ transactions in any order.  So what’s the big deal?

  The following is an example of how banks are making millions of dollars by reordering customer transactions.  Johnny and his family live paycheck to paycheck.  Johnny makes his money the old fashion way, hard work and sweat at the local factory, and he gets paid every two weeks when his employer electronically deposits his check with his bank, Bank X.  Its tough for Johnny and his family to pay all of their bills and expenses, and more often than not, Johnny’s paycheck is not enough to make ends meet.  Johnny’s bank, Bank X, on the other hand, makes money the easy way, insufficient fund fees.  Its quick, easy, and sweat free!  While Johnny makes $15 per hour, Bank X has found a way to make $35 in less than one second!

How does the re-ordering of electronic transactions affect consumers?  Here’s an example, its Thursday Johnny has a balance of $200 in his Bank X checking account.  Johnny started his morning like he does every Thursday, gassed up his truck, $50, and picks up a sausage biscuit and coffee, $5, for breakfast on his way to work.  Later that same day, while on lunch break, Johnny picks up a burger and soda, $8, the family’s laundry from the cleaners, $35, and a birthday card for his grandmother, $4.  After Johnny gets home from work, he takes his wife and three kids out for dinner, $65, then to the movies, $60 (they didn’t buy popcorn, candy or drinks!).  All 7 transactions were made with Johnny’s Bank X debit card and all 7 transactions were made on Thursday.

The total charges for Thursday total $ 227.00.  As a result, his account is overdrawn on Friday.  One would think that Johnny might expect one $35 overdraft fee for the insufficient funds and have an ending negative balance of $-62 ($27 overdraft  + 35 insufficient fund fee) for the day, but instead Johnny is shocked to discover that he has $105.00 in insufficient fund fees and has an ending negative balance of $-132.00.  In other words, his checking account was debited by Bank X for three $35 overdraft fees.  How?  After all, he expected his account to be overdrawn by $23.00, but not according to Bank X’s records.
While Johnny’s transactions were made electronically throughout the day in the following order: $50; $5; $8; $35; $4; $65; and $60, Bank X has re-ordered the transactions from largest to smallest.  Here is the order in which Bank X  ordered Johnny’s debit card transactions for the day: $65; $60; $50; $35; $8; $5; and $4.  Johnny’s account is now overdrawn after the fourth transaction, and he incurs $35 in overdraft fees for the next three transactions.  Had Bank X processed the transaction in the order in which they were actually made, Johnny would have been charged $35 for one insufficient fund fee.  Instead, Bank X charged Johnny’s account $105.00 in overdraft fees!