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Big banks, overdraft fees and predatory practices: Tips for victims

Banks are supposed to be safe havens that not only store our money, but help it grow. Unfortunately, this is not always the case. In some instances, banks are too focused on the bottom line and conduct practices that result in a profit at the expense of their patrons.

One current example under investigation by federal consumer finance regulators involves the predatory use of overdraft fees.

What are overdraft fees? Anyone with a checking account is likely aware of overdraft fees. These fees are charged to an account if the account holder spends more than is present in his or her account.

The fees can vary, but law requires that customers choose to enroll - enrollment is not a mandatory part of taking out a checking account.

How has the use of overdraft programs led to predatory practices? Some banks are using overdraft programs to make money off of their patrons. These financial institutions are presenting overdraft programs as features that are a mandatory component of checking accounts. Patrons then agree to enrollment in the program, believing they do not have any other option. This has led to significant income for large banks.

One bank, TCF Financial Corp out of Minnesota, was spotlighted in a recent report by Star Tribune, a news source in the area. According to the piece, the fees resulted in an annual income stream of approximately $180 million.

TCF is not alone. In 2010, Wells Fargo and other similar banks were involved in a "wave of class-action suits" that resulted in millions of dollars in judgments and, according to a judge presiding over the case, showcased a "snare for the unwary."

How can victims of similar predatory practices fight back? Those who are victims of fraudulent business practices have options. One is to hold the business accountable through a civil suit.

A civil suit serves to hold the guilty party accountable for breaking the law. It can result in monetary compensation to help restore the victim to his or her status before being victimized by these predatory practices.

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