Bank of America Reaches Settlement in Class-action Lawsuit for Overdraft Fees

FIRST PERSON | If Bank of America can get sued for it, how much longer until National City and/or Chase get the summons to appear in court? In a report on August 6th, 2011 from NBC San Diego, Bank of America has reached an out of court settlement in a class action suit over overdraft fees charged to customers who were allowed to exceed their available funds when using their debit cards. Maybe an outlay of several hundred thousand to millions of dollars might encourage Bank of America to update their antiquated card-processing systems and policies.

In the class action suit, plaintiffs accuse Bank of America of being predatory in how they charge overdraft fees, when a customer spends more on their card than what they actually have in their account. The plaintiffs claimed that Bank of America allows them to overdraft on purpose, with the intent of charging exorbitant fees whenever they go over their available balance. Also, customers complain about the fees charged, for whenever a transaction is declined for insufficient funds.

This gives me mixed feelings all over. While I do agree with many claims from banking customers that banks can be a tad bit predatory about how they go about charging overdraft fees, it falls upon the customer to keep track of how much is actually available in their account.

And then, there's that agreement you get when you open up a new account. Yes, I'm well aware that "nobody ever reads all of that." But, they make the details and bank policy available, just the same. For example, it's a good bet your bank processes debits to your account, in the order of largest-to-smallest, and regardless of the order in which the transactions were actually dated. Read that paperwork they hand you, and you'll know things like that.

On the other hand, though, I've also thought it was a bit ridiculous to be charged when a transaction is declined at the point-of-sale, on a card. A paper check being returned? Sure, charge a fee for the resources used to return it for NSF. That's another matter altogether. But to be charged a fee when the processor turns you down? Please. Where is the outlay of resources on the bank's part, for that?

I remember my days working in consumer banking. I was at a call center in Pennsylvania, for a bank I won't name here. My day consisted mostly of explaining to customers why they were being hit by our fees for going over. Most cases were a matter of a customer trying to rely on what the automated phone system told them was their balance, instead of keeping track of the actual balance, themselves.

The automated system might not reflect any transactions recently made, and I believe most customers knew that at the time. But they figured they could just call us, make a little bit of gorilla-dust our way, and we'd just ever-so-gladly refund those fees.

But, we weren't allowed to. The bank I worked for had a strict policy of declining refund requests, unless you had a significant balance with us. But, even in cases where the fees were a result of our error, the answer was usually "no" for refund requests.

We were even instructed to refuse to escalate most calls, when a customer asked to speak to a supervisor. Most folks just hit a brick wall when they called us. The most we could usually do was refer them to their home branch. (Please keep that in mind, in case you ever call customer service, and want to yell at them for a decision.)

So, my observation is, now that Bank of America has been successfully sued by angry consumers, how long until it happens to other banks, too? Will National City (or PNC, or whatever they're called this week) concede? Will Wells Fargo settle?

Will any bank take a more pro-active approach to all of this by simply building a better, more fair system? We have the technology, after all. Or, are the profit margins on overdraft and NSF fees so high, it's worth the risk of legal fees and settlements for Bank of America, and others?