A federal judge in Florida on March 11 denied motions by several of the nation’s leading banks to dismiss lawsuits alleging they charged customers millions in excessive debit card overdraft fees.
Bank of America Corp.; JPMorgan Chase & Co.; Citigroup Inc.; U.S. Bancorp; Wells Fargo & Co. and its Wachovia subsidiary; and other banks are not entitled to dismissal of the complaints, Judge James L. King of the U.S. District Court for the Southern District of Florida wrote in a 50-page opinion. The plaintiffs “have alleged sufficient facts–that, among other things, defendants manipulated the posting order of debit transactions in bad faith so as to maximize the number of overdraft fees incurred–which could lead a reasonable fact-finder to conclude that it would be unjust to retain the benefit of those fees,” King wrote.
Several law firms filed the complaints in October and November seeking damages on behalf of the institutions’ customers.
A spokesperson for Wells Fargo & Co. tells PaymentsSource the bank disagrees with the plaintiffs' allegations and plans to defend itself vigorously. Other banks named in the class-action lawsuit contacted by PaymentsSource, including Citi and Chase, declined to comment.
Plaintiffs’ lawyers in the consolidated class-action lawsuits applauded the judge’s decision. “The collection of excessive overdraft fees, usually around $35 per transaction, impacts millions of Americans each year,” Michael W. Sobol, an attorney with one of the plaintiffs’ firms, Lieff Cabraser Heimann & Bernstein LLP, said in a statement.
The Federal Reserve Board in November issued final overdraft-fee rules that prohibit banks from charging consumers when covering overdrafts caused by ATM use and one-time debit card transactions, unless the consumer opts in to the overdraft-protection service. The rules become effective July 1.
Banks are taking a variety of approaches to comply with the new rules. BofA this week announced that beginning this summer it will eliminate overdraft fees on debit card purchases and will not authorize transactions when there are insufficient funds in the account to cover them (
Sobol welcomed BofA’s decision to abolish debit-overdraft fees, but he said it is a belated move. “We hope that other banks will finally see the light as well and (that) all banks agree to return to their customers overdraft fees that the banks unjustly obtained,” he said.
Beginning Aug. 15, Chase says it will not authorize or pay debit account overdrafts without customers’ approval. It is urging its customers to sign up for the bank’s overdraft protection or overdraft coverage by Aug. 15. (
