TruStone Financial’s Manipulative Overdraft “Protection” Solicitation

My credit union, Trustone Financial, sent me an Overdraft Authorization solicitation today:

TruStone Financial Opt-In Notice

Correct me if I’m wrong, but when you receive a letter from a financial institution you have a business relationship with that says “ACTION REQUIRED” on the cover, the enclosed information should have something to do with taking action on something that’s, you know, required.

But, that wasn’t the case in this case. Instead, Trustone simply wanted me to opt-in to allowing them to charge me more money. Opt-in does not equal action required.

This manipulative request from Trustone appears to be in response to the Federal Reserve’s rule change last year where they told financial institutions that they could charge overdraft fees to customers on debit card transactions only after receiving permission from their customers to do so.

For example, had I used my debit card to pick up a cappuccino at Cuppa Java this morning, but had less than $5 in my checking account at the time, my credit union could take a few different actions:

1. Deny the charge, causing potential embarrassment to me, but saving me from buying something I clearly couldn’t afford. Or, perhaps just using a different card.

2. Pull the money from a savings account or line of credit to cover the expense.

3. Let the charge go through, then charge me a $30 overdraft fee.

4. Let the charge go through, knowing that I’ve been a loyal customer for 20 years and am probably good for it. (LOL.)

Situation #3 is the sticker here. They can no longer do that if I don’t fill out their authorization form. Because I haven’t given them permission to charge me an outrageous fee, they can’t.

This can get particularly ugly for people who are living check to check. Getting hit with even one of those $30 charges can set off a cascade of additional overdrafts, thus more $30 fees, thus more overdrafts. At Trustone, the death spiral can continue until you’re $800 in the hole. At that point, they decline additional debit charges rather than continuing to bury you. I’m not sure if that size of a hole was determined to be the most punitive someone with little money can recover from, or if it’s set by the government, but I suppose it’s nice to know that it ends somewhere.

So, Trustone, if you really think that it benefits me to opt-in to receive $30 charges when attempting to buy things I must not be able to afford, break it down for me. Frankly, this seems WAY more expensive than putting the same charge on a high interest credit card where a $5 cappuccino could ride along at 20% interest for a decade before becoming more expensive than one $30 overdraft fee, but I’m willing to listen.

19 thoughts on “TruStone Financial’s Manipulative Overdraft “Protection” Solicitation”

  1. My bank, a credit union, has another way of making money. When I don’t have money in the account, they do option 1 (this was for an automatic withdraw I had set up) and then charge me $25 for telling the company attempting to take money that there is no money there. Then, when the company tries again, they charge another $25.

  2. So, what are you going to do?

    You don’t honestly use a debit card to buy cappuccino do you?

    Don’t be That Guy, Ed.

  3. I may have an unpopular opinion, but I’m one of those people that think an overdraft fee is OK (except for when they charge you the overdraft AND the returned check fee…FU Wells Fargo). I’ve been on the side of cascading ODF’s too and know how horrible it is. BUT, I’ve also used that punishment to become completely OCD about balancing my checkbook so that I know exactly how much money I have at any given time and setting limits on my spending in order to ensure a monetary cushion to ensure I don’t ever incur those fees again. I haven’t overdrawn my account in 10 years and I pretty much live check to check myself.

    Also, if you’ve been a long time customer and haven’t had an overdraft in a while, you can usually call your bank and sometimes they’ll reverse the fee if you ask really nicely.

  4. The letter is unclear, but Trustone isn’t changing anything. I couldn’t figure that out, though, until I talked to a person at a Trustone branch after I received the same letter some weeks ago. In talking to that person, I got the impression that the letter has caused a lot of confusion and anger.

    Trustone will still take the money out of any savings account to cover it first, without charge. If you do not have anything to cover it, then they may cover it at a $30 charge. The alternative is for them to deny it. This has been the case for a few years. To my knowledge, they have never offered to cover it with their funds without charge.

    The change is the requirement to get your permission for the fee on debit card transactions. Provided you have enough in savings to cover the transaction, it won’t matter.

  5. @Rat, I paid in cash. The debit card for a cappuccino scenario was a hypothetical, although the cappuccino was very real and delicious.

    @Alie, wouldn’t the same lesson be learnable by being declined on transaction attempts? That used to happen to me from time to time in college.

    @Tomas G, I think we’re on the same page as far as our understanding of the rules go. Offering free overdraft options that rely upon savings or lines of credit makes decent sense. Offering a free cushion isn’t going to happen. I think charging people with little or no money such exorbitant fees for having just less than no money is something that deserves the opt-in hurdle required these days. Hopefully, that will convince people that they are better off managing their money a bit closer rather than opting in to a system that can bury them.

  6. Ed, yes, same lesson could be learned, but I’m more motivated by hardship than by embarrassment.

  7. @Alie, if you need a personal financial coach, I’m sure we can work out a deal that’s profitable for me that could help you avoid embarrassment.

  8. For people who have exhausted any other credit source available this is the only protection they have when short term financial problems arise. When you have a car full of hungry kids at 3:00 pm and no one has had anything to eat that day you will be happy to pay an extra $30 for a bag of groceries you can’t afford. Not everyone is just lazy about balancing their checkbooks. If Trustone did’nt send that letter for my appproval then the money would not be available/accessible when I really needed it!!

    What people fail to understand about overdraft fees is once you incur a $30 fee the first time you then know the cost of overdrafting your account and if you don’t absolutely need the extra cash it should be the last time it ever happens. The second time you clearly understand the consequences so I have a tough time listening to people talk about how pissed they are that their bank is always charging them overdraft fees. Shame on them not shame on the bank at that point

  9. I know for a fact that trustone gives you 6 withdrawals a month from your savings(if that’s not a cushion idk what is). open a checking account, its free!!!!

  10. @bbj, TruStone doesn’t charge to take money from my own account, but I don’t believe they’ll rebate any charges ATMs charge.

  11. No they wont. Why should they? It is not them who place the fee it is the bank who provides the service of ATM not Trustone.

  12. @bbj, TruStone can do whatever they want, but I don’t use Trustone as my primary checking because I’ve found a bank that will refund back to me the first three ATM charges charged by ATMs to me. It saves me around $6-9/month. So, I guess they could if they want to compete on that particular line item with companies that offer that benefit.

    Short of that, the ATMs within food coops and, of course, the TruStone locations don’t charge for transactions.

  13. @bbj, technically, it’s not a checking account, since I can’t write or deposit paper checks, but it is free and pays interest. With direct deposits going in, and credit card payments going out, it covers 98% of my banking needs with no cost and a little interest.

    This makes it a good options for my primary account (the money saved on ATM withdrawals dwarfs the money I’d earn with/without interest these days).

    BTW, this is what I’m using for this today.

    It seemed like the best option for me based on how I bank at the time. There may be better options and more options like this available today.

  14. Trustone is taking more than overdraft fee’s. I was with truestone since I started banking. My Dad opened my account in grade school. I left about 5 years ago when they started holding onto my visa(debt)card transactions for six months, and pre-overdraft fees. In case you don’t know what that is it’s when you have some money in your account, but they think you might overdraft because of you previous spending habits. I want them sued, and out of business. Yes I’m bitter and my husband won’t let me persue it. He says to move on. So watch your statements TruStone is and their employees are crooks.

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