Broadway Bank faces suit over fees

Latest potential class-action claims repeated overdraft charges on a single transaction

Bank is the latest San Antonio financial institution facing a potential class-action lawsuit over fees it charges customers.

San Antonio resident Daniel Galleghugh recently sued the bank, alleging it “unlawfully” assesses multiple fees on a single transaction or check.

“Broadway Bank’s improper scheme to extract funds from accountholders already struggling to make ends meet has victimized” Gallehugh and thousands of others, the complaint says.

Similar lawsuits were filed within the past couple of years in state District Court in San Antonio against Frost Bank and Credit Human Federal Credit Union.

Other banks, including Bank of America, have settled similar lawsuits for millions.

The Consumer Financial Protection Bureau announced in late October a crackdown on “surprise overdraft fees,” which occur when a bank customer doesn’t expect such fees.

In his State of the Union address Tuesday, President Joe Bibroadway den touted the so-called Junk Fees Prevention Act, a push to limit hidden fees and surcharges in a number of industries.

Gallehugh alleges in his suit that it’s “routine practice” for Broadway Bank to charge two or more fees, including overdraft fees and non-sufficient funds fees, on a single item.

He says he was charged multiple fees on a payment to Farmers Insurance when it was reprocessed multiple times. Subsequent payments on each payment attempt were marked as “RETRY” on his statements, he says.

“This abusive practice is not universal in the financial services industry,” the complaint adds. It cites major banks that charge one fee even if a transaction is reprocessed for payment multiple times.

Broadway Bank never disclosed “this practice” and indicated it will only charge a single fee on an item or per transac

tion, the lawsuit says.

It charges “$35/item” for overdraft and NSF fees, a fee schedule attached to the lawsuit says.

Fee revenue

The bank collected almost $9.2 million in service charges, which include overdraft and ATM fees, on deposit accounts last year — up from $7.7 million in 2021.

“We’re not able to speak on active litigation but we can tell you that our customers are extremely important to us and we work to protect their investment and trust in Broadway

Bank,” a spokeswoman said.

Many banks have been doing away with overdraft and/or non-sufficient funds fees. As a result, the amount of fee revenue generated by the industry fell 26 percent to $8.8 billion in 2020 from almost $12 billion in 2019, the CFPB found.

On Dec. 8, San Antonio’s USAA Federal Savings Bank stopped charging a $29 fee for non-sufficient funds for each transaction it declined or returned unpaid when an account’s available balance wasn’t enough to cover the transaction.

The bank doesn’t charge overdraft fees when members spend more money than is available in their checking or savings accounts. But it says on its website it will attempt to decline or return a transaction if the available balance is insufficient.

Bank of America announced last year that it eliminated NSF fees and reduced overdraft fees from $35 to $10.

Frost Bank, the largest regional bank based in San Antonio, almost two years ago announced it would not charge an overdraft fee for customers when they overdraw their checking accounts by up to $100 — as long as they have monthly direct deposits totaling $500.

At Frost Bank

Frost previously charged $35 for each overdraft, up to $175 a day. That still applies for overdrafts over $100, but most overdrafts are for less than that

amount. The change also covered NSF fees, spokesman Bill Day said.

In late 2021, a San Antonio resident sued Frost for breach of contract over its overdraft fees.

Frost successfully had the case moved to arbitration in April. Four months later, the plaintiff filed a notice of dismissal saying all matters between the parties had been resolved. Day declined to comment on the case.

A similar lawsuit against Credit Human, filed in April 2021, is pending.

Credit Human unsuccessfully tried to get the case dismissed. In November, it filed a counterclaim against plaintiff Antoinette Hughes. It accused

her of overdrawing her checking account “many times” in the roughly six months it was open and failing to repay a $500 loan.

A lawyer for Hughes didn’t immediately respond to a request for comment.

Hughes’ motion to certify the lawsuit as a class-action was filed in November 2021, but court records don’t indicate that a judge ever heard the request.

In the suit against Broadway Bank, Gallehugh says in support of having a class-action lawsuit that it would be timeconsuming and expensive for each of the class members to pursue litigation on their own. The complaint seeks more than $1 million.