Bank of America settles overdraft fee lawsuit for $410 million
Bank of America has reached a settlement in a huge lawsuit that involves most large retail banks in the United States. B of A has agreed to pay $410 million to settle a class action lawsuit over aggressive overdraft fee practices. Similar suits are being filed against other banks.
Dozens of banks sued for account fees
Overdraft fees and account fees are not popular among consumers, and outrage over fee practices has led to major class action lawsuits against some of the largest financial institutions in the United States and Canada. Nearly 1 million people are part of a massive class action suit, according to Bloomberg, against Bank of America, and similar suits have been filed against JPMorgan Chase, Citigroup and Wells Fargo. Bank of America has won approval to settle for about $410 million. More than two dozen banks from the U.S., Canada and Europe are being sued for overdraft fees, according to Reuters, and the cases were all consolidated into one massive class action. The case is titled In Re: Checking Account Overdraft Litigation.
Undue burden placed on vulnerable consumers
Bank of America is alleged to have processed transactions from largest to smallest instead of by when the transactions were made, thus making it more probable that accounts would fall into overdraft and the sum recovered by the banks would be greater. Overdrafts can function like short term credit; the bank will fund the transaction but add a fee to the amount owed by the account holder. Fees vary by institution, though fees between $25 and $35 are common. Many consumer advocates consider overdraft protections and fees to be abusive to less fortunate consumers. Banks can no longer enroll customers into an overdraft protection program automatically; customers have to elect to enroll.
B of A going mobile
Bank of America is unveiling a pilot program involving mobile banking, according to the Los Angeles Times. If a transaction is declined for insufficient funds, the customer will receive a text message giving the customer the option to have the bank cover the overdraft. If the customer elects to do so, the customer can deposit the required funds by 8 p.m. that evening to avoid the overdraft charge of $35. The option would only apply to that transaction. Overdraft fees will become the province of the Consumer Financial Protection Bureau, according to the New York Times, when the agency begins operation. The CFPB is involved in an ongoing Congressional tug-of-war over the director position and what powers the bureau should have.