When Are Bank Overdraft Fees Unlawful?
Published:
March 4, 2026
Have you been a victim of unfair bank overdraft fees? Unfair overdraft fees and practices are not lawful, and you can take action against financial institutions.
It can be difficult to distinguish between lawful and unlawful overdraft fees, but our legal team is here to help. Discover more about unfair banking practices and the actions you can take against banks that violate your rights in this blog.
What Are Bank Overdraft Fees?
An overdraft fee or overdraft charge is the fee that banking institutions charge you when you need to withdraw more money from your account than you have. Even with monitoring your purchases, unexpected expenses can sometimes occur, and if your account balance is at zero, you will likely get hit with an overdraft fee to cover the transaction. If you have insufficient funds and attempt a lot of transactions, you can receive multiple overdrafts in just one day, but there is a limit to how much you can be charged. You also need to authorize a bank for these overdraft bank fees to take effect.
Overdraft protection helps you to pay for any automatic payments that come out of your account and protect you from falling into debt. When you make your next deposit, you will be given the chance to cover your overdraft amount and bank fees. Some banks also provide you with the option to make an automatic transfer from one account to another account that does not have enough money to cover the transaction.
When Are Overdraft Fees Unlawful?
According to the Federal Reserve Board, certain regulations govern an overdraft fee, namely:
- Banks are prohibited from charging overdraft fees unless a consumer consents to the bank's overdraft protection service.
- If consumers choose not to have overdraft protection, no bank charges or excessive charges may be applied to their accounts.
- An overdraft fee can only be applied if there are insufficient funds to cover a transaction.
- If bank overcharge fees are applied, consumers must be provided with written notice.
- Some banks that provide an alternative to bank overdrafts, such as a line of credit, must state this in the consumer notice.
- No response from a consumer regarding their consent for overdraft protection does not give the bank permission to apply overdraft fees to their account.
As a consumer, you have the right to opt-in for overdraft protection services and to revoke your overdraft protection at any time. You will have this protection until a bank terminates the service.
The Overdraft Fee Claims Against Banks
In the last few years, Shamis & Gentile, P.A. has investigated banks that are charging their clients for overdraft fees when a recurring payment caused an overdraft status on their account. A lot of banks have received attention nationally for this, including Credit Unions Credit Union, , , , and . These unlawful practices include questionable overdraft charges, practices that push customer accounts into overdraft, and the failure to inform clients of overdraft policies. Some banks can even charge clients multiple non-sufficient funds fees for a single transaction, which is also unlawful.
Most lawsuits end with banks paying a settlement to the individuals affected (class-action lawsuit) or a refund for clients that paid unfair overdraft fees. If you were a victim of a bank's unfair bank charges, you can hire overdraft fee attorneys and join a bank overdraft fees lawsuit. Attorneys can help you receive the refund you deserve for unlawful overdraft fees and help to further protect your financial health by ensuring the bank follows the law.
How To Hire An Attorney From Shamis & Gentile?
Shamis & Gentile, P.A. is a professional team of attorneys that has been investigating how banks charge their clients unfair overdraft fees. If you have been a victim of unlawful fees or practices by banking institutions or credit bureaus, submit a claim with our team, and we’ll investigate your case to see if you qualify for a class-action lawsuit. Our attorneys will ensure that all possible legal actions are taken to ensure your financial protection.
Contact our team for more information about bank overdraft fees.
