On September 24, the Governor of California signed AB 2017 (the “Act”) into law. The Act prohibits state-chartered banks and credit unions from charging consumers non-sufficient fund fees (“NSF fees”) when they initiate transactions that are instantaneously declined due to insufficient funds.
Banks will charge consumers the maximum NSF fee of $10 in the regulatory scenario. While some banks may offer to waive an NSF fee for nominal amounts, this is done on a case-by-case basis and therefore it is assumed this is not practised.
Bank policies vary, but an NSF fee can often be waived through an NSF reversal after the fact, especially if it's the first time that it's been assessed. Calling the bank's customer service line and requesting a refund is the best course of action for a consumer.
It is legal for financial institutions to charge overdraft fees when there isn't enough money in a bank account to cover a transaction. However, some transactions (such as those using a debit card) require that the account holder has opted into overdraft coverage before they can be charged.
Gov. Newsom also signed Senate Bill 1075. It says credit-union overdraft fees can be no more than $14 unless a lower federal limit is set. That becomes law in 2026.
Yes, your bank or credit union may waive or refund an NSF charge from your account if it was an honest mistake and you request it be removed.
Although it may feel uncomfortable, the most effective way to get reimbursed for your overdraft fees is to contact the bank or credit union's customer support department. If you don't have a history of overdrawing your account, the bank may be willing to refund or waive the fee to keep you as a good customer.
Yes. If you're not aware of an overdrawn account or simply choose to ignore it, the bank could eventually take legal action against you. The amount your account is overdrawn is a legal debt you owe, which means the bank can sue you and use legal tactics such as wage garnishment to recoup their losses.
In general, for debit card transactions at ATMs or at merchants, consumers must opt-in, or agree up front, that the bank can charge you an overdraft fee for any debit card transaction that overdraws the account. If you don't opt-in, you can't be charged a fee.
Key takeaways. An overdraft fee may be charged by a bank when it temporarily covers transactions that overdraw your account, allowing one or more to clear. An NSF fee is what some banks impose when they decline payments or the cashing of checks that would bring the account to a negative balance.
If you get a NSF charge, call the bank and request for reversal, they often do it!
prohibiting multiple NSF fees when the same transaction reoccurs; restricting the number of NSF fees that may be charged to one in every 72-hour period; prohibiting NSF fees for small overdrawn amounts under $10.
No, you won't go to jail for simply having a negative bank account balance. Overdrafting your account is a common issue many people face.
Beware – your bank overdraft could be taken away
The bank could take it away if they think your're over-using it and are in financial difficulty. But if your bank cancels your overdraft with no warning, you might have grounds to complain.
U.S. Bank has agreed to pay $55 million to settle class-action lawsuits that accused the bank of improperly manipulating its customers' debit card transactions in order to generate excess overdraft fee revenues.
If you overdraw your account for the first time, a call to your bank could get the charge removed. Even on a second or third offense, some banks will work with customers to reverse or waive charges.
The proposed rule, released on January 17, 2024, would limit the overdraft fees large financial institutions can charge by narrowing an exception in Regulation Z for overdrafts that were not previously agreed to in writing. In Regulation Z, such overdraft fees are excluded from the definition of a finance charge.
You can sue your bank if your overdraft fees are “improper.” Whether the charges were improper are determined by your contract with your bank or consumer protection law. You will need an experienced attorney to look over the fee charges and tell you whether they were improper.
Among the 75 banks earning the most overdraft/NSF fee revenue in 2021, 95% of NSF fee revenue has been eliminated. CFPB estimates that, as a result of the elimination of NSF fees at these banks, consumers are saving almost $2 billion annually on a going forward basis.
Key takeaways
A bounced check penalty from a bank can be a high-cost nonsufficient funds fee. Merchants can also charge a bounced check fee; they typically cost $20 to $40.
Generally, an overdraft occurs when there is not enough money in your account to pay for a transaction, but we pay (or cover) the transaction anyway. An NSF transaction is slightly different. In an NSF transaction, we do not cover the transaction.