Bank of America Corp has agreed to pay $410 million to settle lawsuits accusing it of charging customers with excessive overdraft fees. The largest U.S. bank by assets is among the more than two dozen U.S., Canadian and European lenders named as defendants in these type of class actions, which have been consolidated by the MDL panel in a giant proceeding in Florida.
We have similar cases pending against US Bank and Wells Fargo & Co.
Bank of America spokeswoman Anne Pace said the bank has already changed its overdraft practices, eliminating fees for debit transactions and significantly lowering fees for customers who overdraw excessively. She also said the Charlotte, North Carolina-based lender has “fully accrued funds” to cover the settlement.
Notice of the January 27 accord with Bank of America was filed on Friday with the U.S. district court in Florida. The settlement requires court approval.
In a November 2009 complaint filed with the Florida federal court, customers said Bank of America routinely processed debit transactions from largest to smallest rather than in chronological order, causing account balances to fall faster and boosting potential overdraft fees. They said the bank also did not clearly tell customers they could decline overdraft protection, and typically charged the fees to debit card users rather than decline transactions. Bank of America customers would often rack up hundreds of dollars of overdraft fees, even when they may have been overdrawn by only a few dollars, the complaint said.
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.
Last year the Federal Reserve imposed a rule that prohibits banks from charging overdraft fees on electronic and debit card transactions without advance customer approval.
In August 2010, a federal judge ordered Wells Fargo to pay $203 million to California customers who complained about overdraft fees. The bank is appealing.
You can review the notice to the court by clicking on this link.