How to avoid Wells Fargo’s $205 million overdraft mistake

In late December 2022, the CFPB issued an order against Wells Fargo requiring the bank to pay back $205 million in “surprise overdraft fees” charged and not reversed since January 2021. These Authorized Positive/Settled Negative (AP/SN) overdraft fees unfairly charged to consumers were one of the several violations across the bank’s consumer product lines that resulted in a combined settlement of $3.7 billion.

Wells Fargo did what many financial institutions have done: put their overdraft solution on ‘auto-pilot.’ Focused program management, proper communication, thorough disclosures and offering a responsible service that puts consumers first are fundamental aspects of overdraft best practices.

AVOIDING THE AP/SN MISTAKE

AP/SN has been a hot-button topic for the past year. After all, as consumers, we often assume that if our account has a positive balance, then we have that money available to spend. Finding out later that a previous purchase hadn’t yet been factored in, and getting hit with an overdraft fee, could be seen as “surprising” and downright “unfair.”

For that reason, examiners are keeping a close eye on financial institutions’ AP/SN procedures and disclosures. The only way to avoid scrutiny and risk is to make sure your program follows best practices to a ‘T.’

 

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