Bank of America Settles Excessive Overdraft Fee Lawsuit for $410 Million
On Monday, a federal judge gave final approval to a $410 million settlement in a class-action lawsuit to compensate customers who were charged fees one or more times as a result of the bank's practice of posting debit card transactions from highest to lowest dollar amount, rather than in the order they occurred. The bank stopped doing that in May 2009.
Bank of America is far from the only one to have made that practice a policy. Suits have also been filed against J.P. Morgan Chase & Co. (JPM), Citigroup (C) and Wells Fargo (WFC), among others. The majority of banks have since changed their policies and no longer process debit-card charges that way.
The banking industry has defended the system as a way to help customers clear their largest bills first. But in reality, it was a golden goose for overdraft fees, which ranged from $25 to $35 per overdraft.
For consumers, it can be hard to figure out the details of a bank's overdraft policy and its transaction processing system. Details may be available, but they're buried in the lengthy disclosure statements attached to the accounts, which run to an average of 111 pages. That's one reason there is a new push on Capitol Hill to streamline checking account disclosures to one page. Meanwhile, if you want to know how your charges are being processed, just call your bank and ask, consumer advocates advise.
Monday's settlement with Bank of America came with a steep price tag. The $123 million attorney bill means less than $300 million will be paid out to its customers. Those who are included in the settlement will see automatic credits to their account. Former customers will have checks mailed to them.
Affected customers can check www.bofaoverdraftsettlement.com for more information.