Case over overdraft fees settled by Bank of America for $410 million

Case over overdraft fees settled by Bank of America for $410 million

Bank of America has arrived at a settlement in a huge case that involves most big retail financial institutions in the U.S. To settle the suit, B of A has agreed to pay $410 million. The case is part of a large number of related suits against a bunch of different banks.

Account fees gets banks sued

Some of the largest United States and Canadian financial institutions are the target of massive class action lawsuits due to the account fees and overdraft fees that have made consumers angry. Bank of America has one class action suit with about 1 million people in it along with other banks with comparable suits for instance Chase bank, Citigroup and Wells Fargo, reports Bloomberg. Bank of America is able to settle now. A $410 million settlement has already been approved. Reuters explained that over 2 dozen banks in the United States. Europe and Canada are being sued for fees like these, all of which were changed to be class action suits. In Re: Checking Account Overdraft Litigation is the name of the case.

The problem with overdraft fees seen by consumers

To be able 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 instead of 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 customer just like short term credit. Normal fees are between $25 and $35. Some consumer supports don't like overdraft fees since they think it is cruel to consumers that can't afford 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 dropped, the customer will get a text. This text will ask if the consumer wants to get an overdraft fee on the transaction and allow it to go through. The consumer can then avoid the $35 overdraft charge if they're able to deposit the funds before 8 p.m. that evening. This is only allowed with the one transaction. It is very limited. Overdraft fees will become the province of the CFPB, according to the New York Times, when the agency begins operation. The Consumer Financial Protection Bureau 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