Judge's Lid on Rubber-Check Fee Makes Waves at California Banks
LOS ANGELES - California's banks are nervously watching a legal battle between Bank of America and the California Grocers Association over fees banks charge retailers for shoppers' bounched checks.
Officials of the lead banking unit of BankAmerica Corp. said they would appeal last week's ruling that limits such fees and would seek a delay in its enforcement.
Judge John Sutter of Alameda County Superior Court in Oakland ruled that Bank of America could charge $1.73 per item for these returned deposits. These deposit-item-returned fees had been $3.
Worry in the Industry
Bankers were nervous about the idea of a court ruling on any type of fee they charge. "We are not public utilities," said Larry Kurmel, executive director of the California Bankers Association.
Although the ruling applies only to Bank of America, other banks are worried. "We are following it very closely," said John Lee, an attorney for Wells Fargo & Co.
The suit stems from a long-standing battle between the grocers association and California banks over returned-check fees. The retail group maintained that its members should not have to pay any fee since they "haven't done anything wrong," said Don C. Beaver, association president.
The grocers sponsored a bill in the California Legislature that would have limited bank fees, especially those covering bounced checks. But the bill was defeated last month.
Grocers' Plans Not Revealed
Mr. Beaver declined to say whether any other bank would be sued or whether further legislative or other action would be taken on the issue of returned-check fees.
Judge Sutter held that the fees are unlawful and an unfair trade practice.
He ruled that the returned-check fees should be no different from the bank's cost, plus a reasonable profit. A BankAmerica spokesman declined to say what it costs to process a returned check.