Like many other large banks, Bank of America (BoA) issues debit cards to its customers to pay charges directly from their bank accounts. The bank’s deposit agreement gives it the right to charge overdraft fees on charges made with insufficient funds in the account, but doesn’t give the customer the right to opt for having the purchase refused when the card is swiped.
Rather than post charges to the account chronologically, BoA holds onto the charges and posts several at once from the highest to lowest amounts. That depletes the account faster and ensures greater overdraft fees, even if funds were sufficient when the charge was made. This method of posting often results in inaccurate account information that might reflect a positive balance when it is actually negative.
In 2010, the Federal Reserve required that banks obtain advance approval from customers before charging overdraft fees.
Multiple customers filed class actions against BoA—on behalf of about 13 million other customers—which were consolidated into multidistrict litigation involving overdraft fees charged by multiple banks. The plaintiffs alleged breach of contract, unconscionability, conversion, unjust enrichment, and violation of several state laws.
BoA agreed to a $410 million settlement. Another defendant, Union Bank, N.A., agreed to pay $35 million. The court has granted final approval to both settlements.
Citation: In re: Checking Acct. Overdraft Litig., No. 1:09-md-02036 (S.D. Fla. Nov. 7, 2011).
Plaintiff lead counsel: AAJ members Aaron S. Podhurst, Steven C. Marks, Peter Prieto, Stephen F. Rosenthal, and John Gravante III, and Robert C. Josefsberg, all of Miami; and Bruce S. Rogow, Fort Lauderdale, Florida.