BMO Harris Bank settled a major overdraft fee class action for $9.4 million in a multidistrict litigation case, resolving allegations that the bank deliberately reordered debit card transactions from highest to lowest dollar amount to maximize overdraft fee charges. This practice, which affected customer accounts between 2000 and 2012, resulted in customers being hit with multiple overdraft fees on the same day when they might have otherwise avoided them. For example, if a customer made purchases of $10, $50, and $30 on a day when they had $60 in their account, the bank would process them as $50, $30, then $10—causing the account to go negative after the first transaction and triggering overdraft fees on all three purchases instead of just the larger ones.
Today, there is no active overdraft fee class action pending against BMO Harris Bank. However, the bank’s overdraft fee structure has changed significantly in recent years. Understanding both the historical settlement and BMO’s current overdraft practices is important for customers who may have been affected by the prior conduct and for those currently banking with BMO.
Table of Contents
- What Was the Historical BMO Harris Overdraft Fee Settlement About?
- How Much Could Affected Customers Receive From the Settlement?
- What Are BMO Harris’s Current Overdraft Fees?
- How Can Current BMO Harris Customers Avoid Overdraft Fees?
- What Should You Know About the New $20 Overdraft Fee Increase?
- How Do Overdraft Practices Affect Low-Income Customers?
- What’s the Future of Bank Overdraft Fees?
- Conclusion
- Frequently Asked Questions
What Was the Historical BMO Harris Overdraft Fee Settlement About?
The $9.4 million settlement addressed a specific business practice known as transaction reordering. banks typically process transactions in one of two ways: by the order they occurred (chronological), or by dollar amount. BMO Harris chose to process debit card transactions from highest to lowest amount, a practice that bank customers argue was designed to increase the number of overdraft fees collected. If you had $100 in your account and made three purchases that same day—one for $50, one for $40, and one for $30—the bank would process the $50 first, causing your account to go negative.
Then the $40 and $30 purchases would each trigger their own overdraft fee, even though you would have had enough money to cover all three if they’d been processed chronologically. The settlement only applied to customers who held BMO Harris deposit accounts between January 1, 2000, and October 31, 2012. If you had an account during this window and believe you were charged excessive overdraft fees due to transaction reordering, you may have been eligible for compensation. The litigation resolved without BMO Harris admitting wrongdoing, which is typical in settlement agreements.
How Much Could Affected Customers Receive From the Settlement?
The $9.4 million settlement fund was divided among eligible claimants, with payment amounts varying based on how many overdraft fees each customer had been charged during their membership period. Customers who filed claims received compensation amounts proportional to their verified overdraft fees. For someone who was overdrawn multiple times per month over several years, the payout could have been substantial; for those with fewer incidents, the payment would have been smaller.
A critical limitation of this settlement is that it required customers to file a claim—the bank did not automatically compensate people who had been affected. If you were eligible but did not file a claim during the claim period, you likely cannot recover anything now. Settlement claim windows are typically one to two years from the settlement approval date, and after that deadline passes, unclaimed funds are usually distributed to cy pres recipients (charitable organizations related to consumer financial protection) rather than returned to affected customers. This is why staying informed about settlement deadlines is crucial.
What Are BMO Harris’s Current Overdraft Fees?
BMO Harris significantly reduced its overdraft fees in July 2022, cutting them from $36 per transaction to $15 per transaction. In August 2022, the bank eliminated NSF (non-sufficient funds) fees entirely, which was a positive step for customers. However, these improvements came years after the original settlement and only apply to customers going forward. Even more recently, effective February 9, 2026, BMO is increasing overdraft fees again—from the current $15 to $20 per transaction.
The bank did add one customer-friendly provision: overdraft fees will not be charged if your account is overdrawn by $20 or less, providing a small buffer. The bank also caps overdraft charges at three transactions per day, meaning your maximum daily overdraft fee exposure is $45 at the current $15 rate (or $60 at the new $20 rate). This daily cap is better than it could be, but customers should understand that a single busy day of spending while low on funds can still result in significant charges. For example, if you have $30 in your account and make four purchases totaling $100, only the first three will be charged overdraft fees under BMO’s policy.
How Can Current BMO Harris Customers Avoid Overdraft Fees?
The most straightforward way to avoid overdraft fees is to maintain a buffer in your checking account—ideally a minimum balance that covers at least one week of unexpected expenses. Many financial advisors recommend keeping $500 to $1,000 in a checking account specifically to prevent accidental overdrafts. Another approach is to opt into a transfer feature that automatically moves money from savings to checking when your account drops below a certain threshold, though BMO may charge a small fee for this service.
A comparison worth considering: some online banks and credit unions offer accounts with no overdraft fees whatsoever, or they offer more generous grace periods before fees apply. If overdraft fees are a recurring problem for you, it may be worth comparing BMO’s fees to other financial institutions. BMO does offer overdraft protection linked to a savings account or credit card, which can prevent overdrafts from occurring in the first place. However, the trade-off is that you’ll be relying on transfers or credit extensions rather than managing your balance directly, which some people find less transparent.
What Should You Know About the New $20 Overdraft Fee Increase?
BMO’s decision to raise overdraft fees from $15 to $20 in February 2026 means the bank is moving in the opposite direction from recent industry trends. Many banks have reduced or eliminated overdraft fees in response to regulatory pressure and consumer advocacy. The good news is BMO’s grace provision—no fees if you’re overdrawn by $20 or less—essentially means that a single small overage won’t automatically trigger a charge. The warning here is that this grace provision creates a false sense of security.
If you’re regularly overdrawn by $21 or more, you’ll start paying fees again. Another limitation is that the grace provision applies only to the overdraft amount itself, not to the fee. This means if you’re overdrawn by $25, you’ll pay a $20 fee, which is a significant penalty on top of the overdraft. Customers who chronically overdraft due to cash flow problems should consider whether BMO is still the right bank for them, or whether switching to a financial institution with no overdraft fees would be more cost-effective long-term.
How Do Overdraft Practices Affect Low-Income Customers?
Overdraft fees disproportionately affect lower-income customers who have less financial cushion. A person living paycheck to paycheck may face overdraft fees multiple times a month, turning a small balance shortfall into a significant burden. Research has shown that customers who overdraft once are statistically more likely to overdraft again, often because the fee itself pushes them further into financial stress—a costly cycle.
For example, if someone is short $50 and gets charged a $20 overdraft fee, they’re now short $70, making it even harder to recover without another overdraft. This is why the historical BMO settlement was significant: transaction reordering practices made overdrafts even more likely to occur. Someone with a poor understanding of their exact balance might spend thinking they had enough, only to discover later that multiple purchases had each triggered their own fee. The practice essentially weaponized overdraft fees against customers who were already struggling financially.
What’s the Future of Bank Overdraft Fees?
Regulatory scrutiny on overdraft fees has increased significantly in recent years. In 2024, the Consumer Financial Protection Bureau (CFPB) proposed guidance encouraging banks to limit overdraft fees and provide grace periods. While these are recommendations rather than strict regulations, they signal that the banking industry’s reliance on overdraft fees as a revenue source may face pressure going forward.
Some larger banks have already adopted friendlier overdraft policies in response to this environment. BMO’s February 2026 fee increase runs counter to this trend, which may indicate the bank is prioritizing short-term revenue over customer goodwill. Monitor your account carefully after the fee increase takes effect, and don’t hesitate to switch banks if overdraft fees become a recurring problem.
Conclusion
The $9.4 million BMO Harris overdraft fee settlement resolved a significant lawsuit over unfair transaction reordering practices that affected customers from 2000 to 2012. That settlement window has long since closed, but the experience serves as a reminder of why it’s important to understand how your bank processes transactions and charges fees. If you were a BMO customer during the settlement period and believe you were affected, it’s too late to file a claim, but the settlement itself demonstrated that banks can be held accountable for fee practices.
For current BMO Harris customers, the upcoming $20 overdraft fee increase means overdraft costs are rising despite industry-wide movement toward reducing or eliminating these fees. Compare your current banking situation to other options, maintain a balance buffer when possible, and consider whether BMO’s fee structure still makes sense for your financial situation. If you’re struggling with frequent overdrafts, switching to a bank with no overdraft fees or more customer-friendly policies might provide meaningful financial relief.
Frequently Asked Questions
Am I still eligible to claim money from the BMO Harris overdraft fee settlement?
No. The settlement claim period has closed. Only customers who filed claims during the designated window received compensation. After the deadline, unclaimed funds typically go to charitable organizations rather than back to customers.
Why does BMO Harris keep raising overdraft fees when other banks are lowering them?
Each bank makes independent business decisions about fee structures. Some banks have determined that customer retention and goodwill are worth more than overdraft fee revenue, while others still see overdrafts as a viable revenue stream. Regulatory pressure is increasing but has not yet resulted in federal limits on overdraft fees.
If I’m overdrawn by $20 or less, will I definitely not be charged?
Correct. Effective February 9, 2026, BMO will not charge an overdraft fee if your account is overdrawn by $20 or less. However, you will still be overdrawn—you’ll just avoid the fee penalty. Your bank balance will still need to be brought positive.
What’s the best way to avoid overdraft fees at any bank?
Maintain a buffer balance (aim for $500–$1,000), set up overdraft protection linked to savings, enable balance alerts, and understand how your specific bank processes transactions. If you frequently overdraft regardless of these precautions, a bank with no overdraft fees may be a better fit.
Did the transaction reordering settlement apply to all overdraft fees at BMO, or just some?
The settlement applied specifically to overdraft fees that resulted from the reordering practice. The $9.4 million fund compensated customers for fees charged between 2000 and 2012 during the period the practice was in effect.
Can I switch banks if I’ve had overdraft problems with BMO?
Yes. You can switch banks at any time. Some smaller banks and credit unions offer accounts specifically designed for people with overdraft issues, including zero-fee checking accounts. Research options in your area or look for online banks known for customer-friendly overdraft policies.