Frost Bank of San Antonio latest financial institution to face overdraft charge lawsuit

San Antonio’s Frost Bank is facing a possible class action lawsuit, alleging it charged overdraft fees on accounts that weren’t actually overdraft.

The lawsuit follows a similar lawsuit against the Credit Human Federal Credit Union of San Antonio in April, also filed in San Antonio state district court.

Indeed, the lawsuit against Frost Bank contains several paragraphs almost identical to those of Credit Human’s complaint – the only difference being that the name of the bank is substituted for that of the credit union.

Many financial institutions have settled similar complaints about overdraft fees in the past year. Many other cases are still pending.

San Antonio resident Theodore Woods filed a lawsuit against Frost Bank last week for what he calls its “unfair and unreasonable collection of overdraft fees” on certain transactions.

Wood says his contractual documents on checking accounts for overdraft fees promise that Frost will only charge these fees on transactions where there are insufficient funds to cover them.

But Wood adds that Frost charges overdraft fees even when there is enough funds to cover debit card transactions.

“Frost clients have been hurt by Frost’s improper practices to the tune of millions of dollars diverted from their accounts in violation of their agreements with Frost,” Woods alleges.

Bank spokesman Bill Day declined to comment on the lawsuit. He referred a reporter to an April press release that said Frost would no longer charge certain clients overdraft fees when they flow from their checking accounts up to $ 100, provided they have monthly direct deposits. of at least $ 500.

“Frost understands it’s human to make a mistake and wants to show customers they matter by giving them this overdraft grace where they need it,” the bank said.

Frost previously charged $ 35 for each overdraft, up to $ 175 per day, Day said in April. This still applied to overdrafts greater than $ 100, but most overdrafts are less than that amount.

The bank generated $ 32.3 million in overdraft and insufficient fund charges on consumer and commercial accounts in 2020, up from $ 42.3 million in 2019. It has not publicly disclosed how much the change could make. cost in income.

Austin attorney Jeff Edwards, who is part of Woods’ legal team, did not respond to a request for comment on Wednesday. The lawsuit claims more than $ 1 million in damages.

According to the Woods lawsuit, the moment a debit card transaction is authorized to an account with positive funds to cover the transaction, Frost immediately reduces a customer’s checking account to cover the amount of that transaction.

As a result, the lawsuit adds, a customer’s account will always have sufficient funds to cover debit card transactions, as Frost has already set aside those funds for payment. In other words, funds are not available to cover subsequent transactions.

This means that many subsequent transactions incur overdraft fees due to the unavailability of funds reserved for these debit card transactions.

“However, Frost still assesses crippling DO fees on many of these transactions and distorts its practices in its account agreement,” the lawsuit said.

The Crédit Humain affair is still pending. The credit union requested the dismissal, but state district judge Antonia Arteaga denied the request in August. A motion to certify the case as a class action has not been decided.

Other financial institutions have settled similar lawsuits.

For example, in April, the Navy Federal Credit Union agreed to pay the group members $ 16 million in a federal lawsuit filed in Virginia. The credit union allegedly charged multiple insufficient fund fees on the same transaction.

Navy Federal agreed to settle even though the judge granted his request to dismiss the case. The applicant was in the process of appealing the decision when the matter was settled.

In May, Bank of America settled a $ 75 million class action lawsuit over similar allegations.

Two of the law firms in these cases represent Woods, while one is on the legal team representing the plaintiff in the Credit Human case.

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