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Monday, August 1, 2011

Bank of America Settles a $410 Million Class Action Lawsuit for Overdraft Fees


I was reading the news recently, and found out Bank of America settled a class action lawsuit for $410 million dollars in the case, In Re: Checking Account Overdraft Litigation, U.S. District Court, Southern District of Florida, No. 09-md-02036 for overdraft fees to their customers.  So far the settlement is tentative and is scheduled for final approval by the Federal District Court in Florida, in Miami on Nov. 7, 2011.  Several banks are defendants in the lawsuit, such as Wells Fargo, Citigroup, U.S. Bank and JP Morgan Chase to name a few.  The banks were accused or re-sequencing transactions in order to charge more overdraft fees to account holders.

According to www.bofaoverdraftsettlement.com, Bank of America account holders will receive a postcard in the mail with information regarding the recent settlement. Customers who have had their accounts debited for overdraft between January 1, 2001 and May 24, 2011 may qualify for a portion of the settlement. The class members don’t have to fill out any forms, and Bank of America accounts will be automatically credited in the future. Class members that no longer have an account with Bank of America may receive a payment.


How Bank of America screwed customers (with no Vaseline)

Bank of America systematically rip-off their checking account customers, who have low balances in their checking accounts. This rip-off system affects people who live pay check to pay check, rendering them unable to keep large sums of money in their checking account. All it would take is a miscalculation of the account balance by $.01 in order to start a chain reaction of overdraft fees.

The way that their system worked previously, is that transactions were not debited from your account in the order in which they were done. Bank of America would let the larger transaction get processed first, and then debit the smaller transactions.

Example: You have $600 in your Bank of America checking account. You use your ATM/debit card for the following  7 transactions in one day. The transactions are done in the order listed.

TransactionAccount Balance 
Starbucks Latte  $4.00           $596.00
Groceries            $52.00    $544.00
 Cable bill            $65.00   $479.00
Cell phone            $65.00    $414.00
Parking
ticket                     $75.00        
$339.00
Automobile
insurance             $135.00

$204.00
Car payment        $300.00-$96.00
Total transactions
$696.00
-$131.00 after overdraft charges


Okay, so you realize later on that you went over by $96.00. You expect that your account will get debited for a $35.00 overdraft fee for the $300.00 transaction. The way that you see it, there was enough money in your checking account when 6 of those transactions were done. When you check your account statement you nearly collapse when you find out that you have $105 in overdraft fees. This is because Bank of America debited the transactions in the following order:


TransactionAccount Balance
Car Payment                $300.00                        $300.00
Automobile
insurance            $135.00
$165.00
Parking ticket                      $75.00       $90.00
Cell phone             $65.00    $25.00
Cable bill               $65.00   -$40.00
Groceries              $52.00-$92.00
Starbucks latte      $4.00 -$96.00
Total transactions
$ 696.00
-$200.00 after overdraft charges

 


That latte at Starbucks cost you $39.00. This type of situation happened to me so many times that its shameful. I accept responsibility for overdrafts that were due to my own error in calculations. However, this game of letting larger transaction go through first is a money making scheme and it is dead wrong.

Well, I am a former Bank of America customer of nearly ten years, and I can attest to their very predatory overdraft fees. I estimate that within the ten year time frame that I held a checking account, my account was debited over $2,000 in overdraft fees. Their overdraft charge is $35.00 per transaction, and many times I was charged this fee for transactions of less than $10.00. When I received unemployment benefits in 2009, there were instances when my entire UE benefit was eaten up in overdraft fees, since the benefits were direct deposited into my checking account. During these tough times, I would look at my checking account statement and immediately become depressed and teary-eyed.

In order to prevent my unemployment benefits from getting stolen by Bank of America, I had to set up a checking account at another bank. I did it before my Bank of America account was closed and reported to ChexSystems. I also started to use low cost prepaid debit cards for most of my purchases, in order to dramatically reduce the chances of getting charged overdraft fees. My checking account at Bank of America is now closed.

No amount of pleading, cursing, screaming, and demanding will get overdraft fees deleted from a Bank of America checking account. In 2009 my checking account was debited for 10 overdraft fees in one month. I called up Bank of America almost every day for about a week to try and get my money back. The customer service reps were unsympathetic, although one of the reps gave me one “courtesy” refund of overdraft fees. So, I was left with a total of $315.00 in overdraft fees. Another Bank of America customer service representative had the audacity of give me a lecture in balancing checkbook to avoid overdraft fees. My response to this customer service representative was, “The best way for me to avoid overdraft fees, is for me to stop using your services.” It left her speechless.

I use my checking account in good faith. So when I write this blog post, it is not intended to support the practice of writing checks or using your ATM debit card, knowing that there is no money in your checking account. That is not cool. I am talking in support of banking customers that make genuine errors in their calculations from time.  Although Bank of America officials do not admit to any wrongdoing or culpability, they obviously knew that they would not win the case, so they settled in order to avoid a costly trial. Having bilked their customers out of probably billions of dollars in overdraft fees, It is still a win-win situation for Bank of America.



We as consumers need to boycott Bank of America, Chase, Citibank, and other banks that participated in this unscrupulous practice. There are many local community banks and credit unions that would be more than happy for our business. We need to show these banks that unethical corporate practices will not be tolerated. Our hard earned money, is lining the pockets of greedy corporate officers. These actions are obviously, not in the best interests of the customers.


The Federal Reserve prohibits banks from automatically charging their customers an overdraft fee, unless the customer opts-in for overdraft protection. In other words, the customer must agree to accept the overdraft protection provided by the bank and agree to the overdraft fees. I am surprised that the government allowed this to go on as long as it did.


Just as an aside, Bank of America reported a loss in profits, this recent quarter. Pretty astounding, considering the amount of customers that they have been ripping off. I call it divine retribution.


Sources:


http://www.reuters.com/article/2011/05/23/us-bankofamerica-overdraft-settlement-idUSTRE74M63K20110523


http://bofaoverdraftsettlement.com/



Related Posts: 


Another Reason to Hate Bank of America, Wells Fargo, and Other Big Banks


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