SAN FRANCISCO — Banks have long argued that processing debit card transactions by starting with the largest dollar balances and working their way to the smallest benefited customers. But new documents reveal an alternate explanation: big profits.
That was the pitch a popular vendor of "high-to-low" debit transaction processing software delivered to Union Bank of California, a unit of Mitsubishi UFJ Financial Group, according to documents recently unsealed in a consolidated federal class action and reported first by American Banker, an affiliate of Credit Union Journal.
CAST Management Consultants promised that by processing customers' daily checking and debit transactions based on the highest to the lowest dollar values, instead of in chronological order, Union Bank could drastically increase how many "insufficient funds" fees clients paid. Union Bank signed up, according to an amended class action complaint.
The Union Bank case is one of more than 30 related suits pending before U.S. District Judge Lawrence King and the first in which previously confidential documents have been unsealed. Consolidated by the court in 2009, the now unified multidistrict class action alleges that large banks manipulated the order in which they processed debit card transactions to checking accounts to stick customers with higher overdraft fees.
