Customers of Citizens Bank who may overdraw their checking accounts are getting some good news.
The region's No. 2 retail bank announced Wednesday that it had stopped reordering debt card transactions from highest amount to lowest, a practice long decried by consumer groups as a way to maximize overdraft fees.
The bank will now clear debit card transactions in the order they are made.
Citizens had agreed to make the change as part of a $135.7 million settlement last year of a class-action lawsuit lodged against a number of big banks that accused the institutions of improperly manipulating debit card transactions to boost fees. Re-sequencing transactions from high to low tends to drain an account more quickly and trigger the most overdraft charges.
Pittsburgh market leader PNC Bank, which agreed to pay $90 million to settle claims in the multibank suit, dropped its high-to-low policy nearly a year ago and started clearing debit card transactions in chronological order. The bank also extended the new practice to checks.
Citizens said Wednesday that it would continue to process checks from high to low.
Citizens didn't mention the lawsuit in its news release Wednesday. Instead, it touted the change in the way it processes debit card transactions as part of a "Bank Better" initiative designed to better meet customer needs.
The processing change "is part of the overdraft settlement, yes, but it's also part of a bigger picture here," said Sylvia Bronner, spokeswoman for the Providence, R.I.-based bank. "It's part of a package of things we're doing to help our customers bank better."
Among the key features of the package, Citizens is waiving overdraft fees on any transaction valued at $5 or less.
That means a customer could use a debit card to buy a $4 cup of coffee, $2 candy bar, $2 bag of chips and $5 bus pass, and as long as each item was paid for separately, the customer would not have to worry about triggering any overdraft charges on those transactions. (Those purchases could still overdraw an account and cause a larger transaction to bounce, however.)
Some other changes included simplifying the guide to account fees and features, and lowering the overdraft fee from $37 to $35 per item. On the downside, the bank also will charge $35 on the first overdraft per year, up from $22.
Citizens said it would be introducing a new checking account lineup in 2014 and a state-of-the-art ATM network.
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