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Robert Trigaux

So BofA's $410 million settlement on deceptive account fees solves the problem, right?



Wake up and good morning. Remember the case of the $38 cup of coffee? It's about the consumer who mistimed the purchase of a $3 cup of coffee only to find a $35 overdraft fee tacked on to the price of java.

I doubt this will be the end of controversies over how banks charge checking account fees in ways that maximize bank revenues at the expense of customers.... But Bank of America, America's biggest lender, recently agreed to pay $410 million to settle lawsuits alleging deceptive practices in the management of customer accounts that led to excessive fees for overdrafts. 

The settlement stems from overdraft class actions that were combined in 2009 from across the country in Miami federal court. The suits alleged breach of contract, unjust enrichment and usury by more than two dozen banks. Institutions including Citigroup Inc., JPMorgan Chase & Co., Wells Fargo & Co., U.S. Bancorp, SunTrust Banks Inc. and Huntington Bancshares Inc. were named in related lawsuits.

As reported by Bloomberg News, Miami resident Ralph Torres described in his suit against Bank of America how he opened an account in 2000 after seeing advertisements for “free checking.” Torres alleged he was tricked into believing he had more money in his account than was the case, and that Bank of America debited his funds in a way that made it more likely he would incur overdraft fees. Here's the Bloomberg story.

Sound familiar? We've been writing versions of this tale for decades. In his complaint, Torres said the bank mixed up the order and delayed the timing of debits and transactions to maximize the possibility customers will overdraft accounts. “These ‘held-back transactions’ are not always reflected in customers’ available balance, thereby giving the customer the false impression that there is more money in his or her account than there actually is, and encouraging the customer to continue making transactions,” according to the complaint.

Bloomberg quotes Anne Pace, a spokeswoman for Charlotte, N.C.- based Bank of America, stating the bank has already made changes to its overdraft policies, including the elimination of overdraft fees for debit card transactions and reduced fees for customers who overdraw their accounts.

Recent regulations say that banks cannot charge overdraft fees without first getting customers' approval. Some banks have pushed aggressively to get their customers to "opt-in" to overdraft fees, as some customers view the fees as a convenience, the Wall Street Journal reports. But Bank of America decided it wouldn't allow any customers to opt-in, and did away with any ability to overdraft. CEO Brian Moynihan had even said the practice wasn't in the bank's or its customers' interest. For those seeking a migraine or a Ph.D in banking, check out these checking account rules BofA offers now. 

Overdraft fees industry wide totaled about $23.7 billion in 2008, up from $10.3 billion just four years earlier, according to the Center for Responsible Lending

In August, a federal judge ordered Wells Fargo to pay $203 million to California customers who complained about overdraft fees. The bank is appealing. Why do we care in Florida? Because this is the year that Wells Fargo completes its assimilation of Wachovia (which Wells already bought) in the Florida market (the Wachovia name disappears in place of Wells Fargo) and is expected to start asserting its own bank policies on Floridians.

-- Robert Trigaux, Times Business Columnist




[Last modified: Monday, February 7, 2011 7:05am]


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