J.P. Morgan settles overdraft-fees suit

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Case in Point

March 6, 2012

J.P. Morgan settles overdraft-fees suit 

The plaintiffs alleged that the defendant’s method of processing debit card purchases resulted in multiple overdraft charges when it might have been only one overdraft fee if the purchases had been deducted in the proper order. The bank agreed to settle for $110 million. In re: Checking Account Overdraft Litig.

J.P. Morgan Chase Bank, N.A., is the latest bank to settle customers’ claims that its overdraft process resulted in excessive and illegal fees.

In 2009, customers filed class action suits against several banks, alleging the defendants told them that debit card purchases would be withdrawn immediately from their account. Instead, the defendants saved the charges until the end of the day, when they were processed together. The processing order was frequently changed so that the higher charges were deducted first, resulting in multiple overdraft charges when it might have been only one overdraft fee if they had been deducted in the proper order. The banks also failed to inform customers that they could opt out of this overdraft procedure and didn’t notify them or stop the charge when an overdraft was about to occur.

Using this process, banks were able to amass more in overdraft fees on debit cards than in penalty fees on credit cards. For instance, the plaintiffs asserted, a $27 overdraft charge on a $20 purchase is the same as being charged a 3,520 percent annual percentage rate.

On August 14, 2009, Andrea Luquetta’s balance in her J.P. Morgan account was about $1,200, and between August 15 and August 17, she made seven debit card charges totaling about $460. Although Luquetta had set up an automatic bill payment deduction of about $1,700 for August 22, the bank processed the payment on August 17, before processing most of the other charges. Luquetta incurred seven overdraft fees totaling more than $200. She filed a class action against J.P. Morgan, claiming she should have been charged one fee when the bill payment put her account in the negative.

J.P. Morgan agreed to settle the class actions against it for $110 million, as well as unspecified changes to its overdraft process.

Citation: In re: Checking Account Overdraft Litig., No. 1:09-md-02036 (S.D. Fla. Feb. 3, 2012).

Plaintiff coordinating counsel: AAJ members Stuart Z. Grossman, David Buckner, and Seth E. Miles, and Robert C. Gilbert, all of Coral Gables, Fla.


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