Citizens Financial Group Inc. has agreed to pay $137.5 million to end a class action over its overdraft fees.
The bank announced the deal in a joint filing with the plaintiffs' attorneys who have brought similar cases against dozens of other major banks.
All of the suits, which are consolidated in Florida federal court, center on banks' practice of manipulating the posting order of debits to customer accounts. By reordering the charges from high to low, Citizens and its peers heaped additional overdraft fees on debit-card customers who spent more money than they had in their accounts.
The settlement stands out for its size, which one of the plaintiffs' attorneys, Robert Gilbert, described as "a very significant percentage" of the alleged harm done to Citizens' customers.
"We think it's an excellent result for our clients," he said. Citizens is owned by Royal Bank of Scotland Group (RBS).
Previous settlements in the case have ranged from around 10% of the alleged damages in a settlement with Bank of America to a high of 63% in a case against Union Bancorp. Gilbert says that the Citizens settlement will not match that upper level.
The settlement amount was so high in part because Citizens had no contractual provision requiring consumer arbitration. While such mandatory arbitration clauses have not carried much weight in the case to date, banks that used them still have a potential out of the litigation.
"Arbitration is a very big challenge," Gilbert said. "Citizens did not have an arbitration clause at all, and that reflects itself in the result."
Well over a dozen banks have already settled the overdraft litigation. Cases against PNC Financial Services (PNC), Toronto-Dominion Bank (TD), Capital One Financial (COF) and Comerica (CMA) are currently in litigation, though both Capital One and Comerica are in settlement talks with the plaintiffs.