Overdraft protection on your bank account can be useful. When the bill comes at a restaurant, you won't be embarrassed if you don't have enough cash in your bank account. Or if you make an important payment at a merchant, it'll be sure to go through.

But the protection also can come with a fee when you overdraw your account using your ATM card or debit card. And a few banks have been accused by the Consumer Financial Protection Bureau of deceiving consumers into signing up for the service and not informing them of the costs.

The Consumer Financial Protection Bureau recently sued TCF National Bank, a Minnesota-based regional institution with approximately 360 branches in seven states, for allegedly tricking hundreds of thousands of customers into signing up for "overdraft service."

For those customers, every time they overdrew their account, they were hit with a fee of $35.

Part of the problem facing many consumers is that they are confused by what overdraft protection means. The term "protection" is actually a misnomer, because when you opt in for the service, you are actually authorizing the bank to let you overdraw your account by using an ATM or debit card and then charge you penalties that can amount to $30 or more each time you overdraw your account.

Keep in mind that banks don't need your opt-in permission to charge you overdraft penalties when paper checks and automatic electronic bill payments bounce.  

Consumers who sign up for overdraft protection often find themselves caught in a cycle of spending more money than they have in their account. As the fees add up, it becomes even harder to recover, leading them to overdraw their accounts further, which, of course, leads to more fees.

The problem hasn't always been so onerous. There was a time when you could overdraw your account as an occasional courtesy. Today, though, overdraft fees have become a regular source of income for banks and credit unions generating nearly $33 billion in revenue annually, according to Moeb Services, a Chicago-based research firm that tracks bank and credit union pricing.

About 15 percent of consumers overdraw at least once a year, according to a Pew research study conducted in 2013, the latest data available. Among overdrafters, about one-third paid three to nine penalties in the previous year, and 16 percent paid at least 10 to 20 penalties.

"Many consumers don’t understand that if they don’t opt in for overdraft protection, [their transactions] will be declined and the bank can’t charge them a fee," says Thaddeus King, an officer with the Pew Charitable Trust's consumer banking project.  

Making matters worse is that the CFPB says some banks are getting their customers to sign up for overdraft protection through deceptive means.

In the case of TCF National, the complaint alleges that TCF placed the overdraft protection opt-in agreement after a series of other mandatory agreements customers had to accept when they opened a new account in a bank branch or online. It also said that branch employees called existing customers to get them to opt in using bank-provided scripts. Those scripts did not explain that the overdraft program was optional, or that it would result in overdraft fees.

The complaint also said bank employees were offered cash incentives to hit high opt-in targets, that senior bank executives partied after 300,000 customers signed opt-in agreements and then again when 500,000 opt-ins were signed. The bank's CEO at the time even named his boat "Overdraft." 

The result was that 66 percent of TCF customers opted in, three times the average rate at other banks, according to the CFPB.  

TCF said in a statement that it "rejects the claims" and "will vigorously defend against the CFPB's complaint."

The CFPB has gone after other banks as well. Last July, it slapped a $10 million fine on Santander Bank, which is based in Delaware and the nation's 29th largest bank, for allegedly deceiving consumers into signing up for an overdraft service they didn’t want and charging them fees. 

At the time, Santander Bank said in a prepared statement, "We regret that the vendor we hired to promote our overdraft service may not have followed our instructions and we did not supervise them as closely as we should have." The bank said it ended its relationship with that vendor and took steps to improve oversight.

In April 2015, a CFPB enforcement action led Alabama-based Regions Bank, the nation's 18th largest bank, to refund $49 million to customers who were allegedly charged overdraft fees but hadn't opted in for overdraft coverage. Regions also paid a $7.5 million fine.

Regions did not admit or deny the CFPB's findings. The CFPB, however, credited Regions for reporting the erroneous overdraft fees to the agency and for promptly reimbursing consumers.

How to Avoid Overdraft Fees

Consumers need to be aware that overdraft protection is not mandatory and that banks aren't always upfront about the costs involved. You can protect yourself by:

Saying no to overdraft protection. If you choose not to agree to sign up for overdraft protection, the bank will simply deny your debit or ATM transaction, sparing you the big fee. If you do sign up, there are other steps you can take to avoid being hit with an overdraft fee, such as linking your checking and savings accounts to help cover payments and signing up for online and mobile banking account alerts so you always know your balance. 

Opening a bank account that doesn't allow for overdrafts. The nation’s biggest banks—Bank of America, Chase, Citi, U.S. Bank, and Wells Fargo—offer so-called lower-risk accounts, which offer just about all the same services a regular checking account but won't put through a payment if you don't have the funds in your account. These accounts aren't always promoted, so ask your bank about them.

Checking to see if your bank offers "friendly overdrafts." About 34 percent of banks and 13 percent of credit unions won't charge a penalty if you overdraw your account by small amounts, generally $10 or less, according to Moebs Services. Ask your bank if it has this policy.