In re TD Bank, N.A. Debit Card Overdraft Fee Litig.

Citation150 F.Supp.3d 593
Decision Date10 December 2015
Docket NumberCivil Action No.: 6:15-MN-2613-BHH,MDL No. 2613
Parties In re: TD Bank, N.A. Debit Card Overdraft Fee Litigation
CourtU.S. District Court — District of South Carolina
Opinion and Order

Bruce Howe Hendricks

, United States District Judge

This matter is before the Court on the defendant's motion to dismiss counts I-VI and VIII of the plaintiffs' consolidated amended class action complaint (“CAC”) for failure to state a claim upon which relief can be granted. (ECF No. 53.) For the reasons set forth in this order, the defendant's motion is granted in part and denied in part.


In this litigation, the plaintiffs challenge the manner in which the defendant, TD Bank, N.A., and some smaller state banks that it has acquired (collectively “TD Bank” or “the Bank”), assessed overdraft fees, posted debit transactions, and assessed “sustained” overdraft fees.

Eight putative class actions, King, et al. v. TD Bank, N.A. , D.S.C. C.A. No. 6:13-cv-02264; Padilla, et al. v. TD Bank, N.A. , E.D. Pa. C.A. No. 2:14-cv-01276; Hurel v. TD Bank, N.A., et al. , D.N.J. C.A. No. 1:14-cv-07621; Koshgarian v. TD Bank, N.A., et al. , S.D.N.Y. C.A. No.; Goodall v. Toronto-Dominion Bank, et al. , M.D. Fla. C.A. No. 8:15-cv-00023; Klein, et al. v. TD Bank, N.A. , D.N.J. C.A. No. 1:15-cv-00179; Ucciferri v. TD Bank, N.A. , D.N.J. C.A. No. 1:15-cv-00424; and Austin v. TD Bank, N.A. , D. Conn. C.A. No. 3:15-cv-00088, were filed against TD Bank in federal court. On April 2, 2015, the Judicial Panel on Multidistrict Litigation (“MDL”) centralized these actions and assigned them to this Court. On April 15, 2015, the MDL Panel transferred an additional putative class action, Robinson v. TD Bank, N.A. , S.D. Fla. C.A. No. 15-cv-60469, to this Court for inclusion in this litigation, MDL No. 2613. On May 20, 2015, the Court appointed co-lead counsel, the plaintiffs' executive committee, and liaison counsel. On May 22, 2015, the Court consolidated all nine actions for pretrial purposes and directed the plaintiffs to file an amended or consolidated complaint within thirty days of the date of that order.

The plaintiffs' CAC was filed on June 19, 2015. (ECF No. 37.) TD Bank filed a motion to dismiss the plaintiffs' CAC for failure to state a claim on August 3, 2015. (ECF No. 53.) The plaintiffs filed a response in opposition to the motion (ECF No. 59) on September 2, 2015, and TD Bank filed a reply on September 23, 2015 (ECF No. 60). A hearing was held on the motion to dismiss on October 14, 2015, and the Court took the matter under advisement. TD Bank filed a notice of supplemental authority in support of the motion to dismiss on October 22, 2015. (ECF No. 63.) The plaintiffs filed a response to the notice of supplemental authority on October 23, 2015. (ECF No. 64.) On November 30, 2015, the plaintiffs filed a notice of supplemental authority. (ECF No. 66.) TD Bank filed an objection to the plaintiffs' notice of supplemental authority on December 4, 2015. (ECF No. 67.)


Unless otherwise indicated, the following facts are drawn from the CAC and construed in the light most favorable to the plaintiffs.

I. TD Bank's Overdraft Program

The plaintiffs' claims arise from TD Bank's assessment and collection of allegedly improper and excessive overdraft fees. The claims can be grouped into five categories of alleged behavior by the Bank: (1) assessment of overdraft fees when there are sufficient actual funds in the account; (2) assessment of overdraft fees as a result of reordering debit transactions from high to low; (3) assessment of overdraft fees on transactions intentionally authorized into overdraft without notice to customers; (4) assessment of overdraft fees on ATM and one-time debit transactions in violation of Regulation E, 12 C.F.R. § 205.17

, under the Electronic Funds Transfer Act (“EFTA”); and (5) assessment of “sustained” overdraft fees on checking and money market account customers in violation of the National Bank Act's prohibition on the collection of usurious interest (12 U.S.C. §§ 85 -86 ).

TD Bank provides debit cards to its checking account customers. Customers can use their debit cards to access their checking account funds by making purchases or withdrawing money from ATM machines. The Bank is instantaneously notified of debit card transactions and has the option to accept or decline the transaction at the point of sale. According to the plaintiffs, TD Bank can immediately determine whether customers have sufficient funds in their accounts to cover the transactions. The Bank's contracts with its customers provide that the Bank can assess overdraft fees on their accounts when it has advanced funds because there was insufficient money in the account to cover the transaction. If a customer does not have sufficient funds in his or her account to pay for a transaction, the transaction is considered an “overdraft.”

Instead of declining such transactions or informing customers that they will result in overdraft fees, TD Bank will, in its discretion, honor transactions that result in overdraft. However, if TD Bank honors an overdraft, it charges the customer a $35 fee for each overdraft, up to five charges per day. At the time of the transaction, TD Bank does not alert its customers that it will cause an overdraft. The plaintiffs aver that TD Bank paid, rather than returned or declined, nearly all debit card charges resulting in overdraft, even though the accounts in question purportedly lacked sufficient funds to cover the relevant transactions. The Bank charged customers the same $35 fee for each overdraft regardless of the amount of the transaction.

TD Bank's automated overdraft system is allegedly designed to maximize overdraft fee revenue without regard to customers' particular financial circumstances. The plaintiffs assert that when marketing its overdraft protection program, TD Bank represents that it takes the personal circumstances of each customer into account before exercising its discretion in deciding whether to authorize an overdraft transaction. This allegedly creates a false impression in the mind of the consumer that the Bank assesses personal information before making individualized decisions on a case-by-case, transaction-by-transaction basis. In reality, claim the plaintiffs, the Bank simply honors nearly every transaction that will create an overdraft, thus increasing the number of fees it can charge.

Next, the plaintiffs allege that TD Bank assessed overdraft fees on customers' accounts even when there was still enough money in the account to cover the transaction. The Bank purportedly did not notify plaintiffs that it was possible to incur overdraft fees on transactions even when there were sufficient funds in the checking account to cover the transaction at the time it was executed. At the time such transactions were executed, TD Bank also did not notify customers that their checking accounts were or would be overdrawn, or that they would be charged an overdraft fee as a result of the transaction. The plaintiffs assert that TD Bank deemed accounts to be overdrawn when sufficient funds still remained in the account by using a calculation called “available balance.” Instead of using the actual balance of money in the account to determine when it was overdrawn and when a fee should be triggered, TD Bank used a reduced balance calculated by subtracting “pending” debit transactions, which may not settle or be paid for several days and may not settle for the authorized amount or at all. This reduced balance is the “available balance.” TD Bank treated transactions that caused the “available balance” to fall below zero, or to remain below zero, as an “overdraft.” TD Bank then assessed the associated overdraft fees without regard to the actual balance, which was still positive. By so doing, claim the plaintiffs, TD Bank increased the number of fees it charged to its customers because fees that would not otherwise have been assessed if the actual balance was considered were triggered by the use of a negative available balance for accounting purposes.

The plaintiffs further allege that TD Bank manipulated and reordered transactions on customers' deposit accounts from highest to lowest in order to increase the overdraft fees it assessed its customers. This practice is commonly called “high-to-low” posting. A transaction is “posted” when TD Bank either debits an expenditure from the customer's account or credits a deposit to a customer's account. (Ex. A, ECF No. 37-1 at 8-9.) TD Bank does not debit funds from a customer's account at the moment a transaction is made. Instead, TD Bank purportedly batches together several days' worth of transactions and orders them from the highest to the lowest dollar amount before posting them to the customer's account. The plaintiffs claim that the manipulation of posting order from chronological to high-to-low caused them to incur more overdraft fees than they otherwise might, because the balance in the account was depleted more rapidly when the highest expenditures were applied first. Moreover, they assert that customers were unable to easily avoid these overdraft fees even if they closely tracked their income and spending because TD Bank's monthly account statements and online account tools obfuscate the connection between a particular transaction and the overdraft fee that transaction has triggered. (See CAC, ECF No. 37 at ¶ 119.)

TD Bank has already been sued regarding its high-to-low posting overdraft practices. Several cases filed against TD Bank were settled as part of a multidistrict litigation proceeding known as In re Checking Account Overdraft Litigation

in the United States District Court for the Southern District of Florida (“MDL No. 2036). (See Order of Final Approval of Settlement, Authorizing Service Awards, and Granting Application for Attorneys' Fees, Ex. C., ECF No. 37-3.) TD Bank settled the case for...

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