Through a comedy of errors involving other financial institution, my checking account at a credit union went negative, and I was charged $200 in overdraft fees. I don't think I'm responsible for the errors, but the credit union is unwilling to negotiate the fees to my satisfaction. I was about to close the account anyway (which is why the balance was low).

What would be my liability if I were to:

  1. Add enough to the account such that the only remaining balance due to the credit union equals the sum of the fees ($200), and
  2. Walk away?

What would the credit union have to do to pursue me? I'm trying to see how much leverage I have to negotiate a better settlement.

Update: The credit union and I both reside in Maryland.

  • What state or country is your credit union branch in? – Jasper Feb 4 '16 at 21:33

The financial institution would not send it to a collection agency for only $200. It is unlikely they would report the delinquency to a credit reporting agency. They will report the delinquency to a deposit account reporting agency, such as Chexsystems. Financial institutions will nearly always run a Chexsystems (or equivalent) report before opening a new account. If you fail to rectify your $200 negative balance, you will have trouble opening a deposit account at many financial institutions in the future. They will all know you left a bad account with this credit union.

You should pay the credit union their fees, then pursue a reimbursement from whichever party you think caused the overdraft. For example, if Bank A hit your account twice and caused the overdraft, you still need to pay the credit union. Bank A is at fault, not your credit union.

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  • Isn't it infeasible to pursue a reimbursement from the other institutions? I have no leverage with them. – Merchako Feb 4 '16 at 22:08
  • Generally banks don't mind correcting mistakes if it's clear a mistake was made. Dirty little secret: They do more error correcting than you'd expect, since it's sometimes cheaper than preventing yhe errors. – keshlam Feb 4 '16 at 22:30
  • @keshlam I've worked with these people for many years and found that its more a case of often than sometimes. The issue is that they make ore money off these errors and correcting them costs not only the cost of fixing the issue but the extra infrastructure costs of upgrading frankly obsolete hardware and software. These people still advertise for COBOL developers to maintain code written before I was born! – MD-Tech Feb 5 '16 at 13:11

When faced with this scenario, you do have a few options.

  • Request the company that made the error to fix the error.
  • Request the institution charging the overdraft fee to reduce or remove the charge.
  • pay it yourself.

Ultimately if you cant get the first two to cover the fees, then you have no choice but to cover it yourself.

You have the most leverage when you can threaten to end the business relationship. For the company that caused the problem, the leverage may actually be with another of their customers. If there is another person involved in this transaction they may have to put leverage on their financial institution to address the issue.

If you already told your credit union you are leaving then you may have lost the leverage.

The issue of walking away should be a non-starter. Depending on the paperwork you signed, they may decide to go after you or not. Your anger with one of the financial institutions shouldn't mean that you walk away from your debts.

Here is the text from my credit union's disclosure document.

Collection and Right of Offset

The Credit Union has the right to seek collection of any amount owed under this agreement or any other agreement you have with the credit union, including fees, charges and overdrafts paid. You authorize the Credit Union to offset from any other account you have in the Credit Union (except Retirement Accounts) without demand to pay certain debts or other charges you owe us. You agree to pay the costs of collection, including court costs and reasonable attorney’s fees.

Overdrawn Accounts

The owner and joint owner (if any) agree to be jointly and severally liable for negative balances on any accounts in which either or both owners have an ownership interest, including any overdrafts, regardless of the cause, and agree to immediately deposit sufficient funds to cover the negative amount of the overdraft. The owner and joint owner (if any) agree that the Credit Union has the right to transfer funds from any accounts (except Retirement Accounts), in which either have an ownership interest, to correct a negative or overdrawn amount on any account on which either of their names appear. The owner and joint owner agree to reimburse the Credit Union for all costs of collection, including court costs and reasonable attorney’s fees.

Statutory Lien

You acknowledge and pledge to the Credit Union a statutory lien in my/our shares and dividends on deposit in all joint and individual accounts and any monies held now and in the future, to the extent of any loan made and any charges payable. The statutory lien does not apply to shares in any IRA.

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