B of A to pay $410 million to settle overdraft lawsuit

NEW YORK Sat Feb 5, 2011 1:25pm EST

A Bank of America sign is displayed outside a branch in Tucson, Arizona January 21, 2011. REUTERS/Joshua Lott

A Bank of America sign is displayed outside a branch in Tucson, Arizona January 21, 2011.

Credit: Reuters/Joshua Lott

NEW YORK (Reuters) - Bank of America Corp (BAC.N) has agreed to pay $410 million to settle lawsuits accusing it of charging customers with excessive overdraft fees, court documents show.

The largest U.S. bank by assets is among the more than two dozen U.S., Canadian and European lenders named as defendants in the class-action litigation, which in 2009 consolidated lawsuits filed across the country.

JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) are among the other defendants named in the case, court records show.

Bank of America spokeswoman Anne Pace in an email 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 Miami. The settlement requires court approval.

Many banks let customers overdraw their accounts in exchange for fees, typically $25 or $35. Critics say the fees disproportionately burden lower-income customers and others who often maintain low account balances.

In a November 2009 complaint filed with the Miami 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, a federal judge ordered Wells Fargo to pay $203 million to California customers who complained about overdraft fees.

The bank is appealing.

The case is In re: Checking Account Overdraft Litigation, U.S. District Court, Southern District of Florida, No. 09-md-02036.

(Editing by Mohammad Zargham)

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Comments (6)
“Overdraft fees industry wide totaled about $23.7 billion in 2008, up from $10.3 billion just four years earlier” + “Bank of America Corp (BAC.N) has agreed to pay $410 million to settle lawsuits” … unless BOA was only a minor part to this huge difference (unlikely), I would have to say that BOA is still making a nice little profit off of this.

Feb 05, 2011 2:27pm EST  --  Report as abuse
ohohmrbill wrote:
Is Arizona going to help its people by filing against B of A also? The only reason why these banks started this accounting practice is when the recession went into full swing in order offset the loss from foreclosures and faulty loans that they gave out. People were also closing there accounts. Those that were dedicated customers to there bank were punished for continuing bussiness with them. There motto should be, we rob from the little and pass our profits on to wall street and our CEO’s. As if things were not getting hard enough for the average person or family they wanted to squeeze the last few dollars now before they were forced to close there accounts with them. My sock drawer is just as secure as any bank. Our government is also to blame. They to were fully aware of this. They both should be held accountable.

Feb 05, 2011 3:54pm EST  --  Report as abuse
Eldarion wrote:
The fees were very high (and were instituted long before the implosion of the real estate market.) They were charged to people to irresponsible or dishonest to handle their accounts. Where is personal responsibility? If someone hasn’t the intellectual or moral resources to handle a checking account, they should be using their sock drawer and not blaming the government or corporations for their shortcomings.

Feb 05, 2011 11:22pm EST  --  Report as abuse
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