(Toronto) The high cost of not having enough money in your account is being highlighted by a class action lawsuit filed against one of the country’s largest banks.
In the court documents filed as part of the class action against TD Bank, we find the striking example of the main plaintiff, Tyler Dufault, who was charged $96 in fees because he was missing 45 cents to pay a PayPal bill.
The class action focused on whether the bank properly disclosed to its customers that they could be charged the $48 non-sufficient funds fee twice.
A $15.9 million settlement was approved this week by the Ontario Superior Court in this class action.
This settlement came at a time when the billing of these fees is raising more and more questions.
In the United States, many banks have already decided to eliminate them following pressure from certain regulators. In Canada, banks are also under pressure to reduce them, or even eliminate them completely.
“This is another predatory practice by banks to charge such large sums,” lamented Donna Borden, head of the advocacy group Acorn.
Major banks in Canada charge between $45 and $50 when there is not enough money in an account to process a pre-authorized withdrawal such as an automatic bill payment. If the transaction is rejected, merchants are allowed to attempt to redo it within 30 days.
TD, which admitted no liability in the settlement, agreed under the terms to change its information and also change its policy to allow for a full fee waiver after an initial question raised by a customer.
The settlement is expected to provide approximately $88 in compensation to the approximately 105,000 TD customers who were charged twice between February 2, 2019 and November 27, 2023, giving an idea of how many people are affected by these charges.
For Adam Tanel, a partner at Koskie Minsky who filed the class action, it’s nice to know that customers will get their money back.
“The notion of a $48 fee for an electronic transaction that doesn’t go through is certainly irritating,” he said.
It’s unclear how much it costs banks to process these transactions, but it could be minimal.
The U.S. Consumer Financial Protection Bureau, which has been aggressively fighting unwanted fees, estimated in a report released in January that the average cost of processing insufficient funds for debit transactions was likely less than $0.005 US per transaction.
Nearly two-thirds of U.S. banks with assets of more than $10 billion have waived these fees, which the Consumer Financial Protection Bureau estimates will save consumers $2 billion a year.
BMO, RBC, CIBC and Scotiabank declined to answer any questions about the insufficient funds fees, citing ongoing court cases.