Suit over overdraft fees settled by Bank of America for $410 million in payment

Bank of America has arrived at a settlement in a huge case that consists of most big retail financial institutions in the U.S. B of A has agreed to a payout of $410 million to make the suit disappear. Extreme overdraft policies are the subject of a massive class action, involving about one million people and more than two dozen banks, including B of A.

Fees on accounts lead to lawsuits

Some of the largest United States and Canadian financial institutions are the target of huge class action lawsuits due to the account fees and overdraft fees that have made consumers angry. Bloomberg states that there have been suits against Citigroup, Wells Fargo and JPMorgan Chase. There is one giant class action suit against Bank of America with almost a million people involved. A $410 million settlement was approved for Bank of America. More than two dozen banks from the United States. Canada and Europe are being sued for overdraft fees, according to Reuters, and the cases were all consolidated into one massive class action. There is one name for the case. It is In Re: Checking Account Overdraft Litigation.

The problem with overdraft fees seen by customers

In order to create multiple overdraft fees rather than just one or two, Bank of America has been accused of processing largest to smallest transactions so that accounts will go into overdraft over and over rather than in the order they came in. Banks will allow a transaction to go through with overdraft fees but add a charge to the account for the consumer just like short term credit. Generally between $25 and $35 is typically charged. That’s an average area for fees. Some customers cannot possibly afford overdraft fees. That is why consumer supports do not like them. Banks can no longer enroll consumers into an overdraft protection program automatically; customers have to elect to enroll.

Mobile use at Bank of America with a pilot program

The LA Times reports there is a pilot program at Bank of America starting. After a transaction has been declined, the consumer will get a text. This text will ask if the consumer wants to get an overdraft charge on the transaction and allow it to go through. The customer can then stay away from the $35 overdraft charge if they are able to deposit the funds before 8 p.m. that evening. Only that transaction would have the option. The New York Times states that when the Consumer Financial Protection Bureau begins operations, overdraft fees will become essential to review. The CFPB is involved in an ongoing Congressional tug-of-war over the director position and what powers the bureau should have.

Information from

Bloomberg

bloomberg.com/news/2011-05-23/bank-of-america-410-million-overdraft-fee-accord-wins-tentative-approval.html

Reuters

reuters.com/article/2011/05/23/business-us-bankofamerica-overdraft-sett-idUKTRE74M63K20110523?type=companyNews

Los Angeles Times

latimesblogs.latimes.com/money_co/2011/05/bofa-overdraft-text-message.html

New York Times

nytimes.com/2011/05/19/opinion/19thu3.html