The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- Citizens Bank to Pay $137.5M to Settle Overdraft Suit
Boston Globe Online 25 Apr 2012
Citizens Bank agreed to pay $137.5 million to settle a class-action lawsuit accusing it of deliberately processing customers’ debit card and ATM transactions in such an order as to generate excess overdraft fees. The suit is part of multi-district litigation involving more than 30 different banks before US District Judge James Lawrence King in Miami. Bank of America last year agreed to pay $410 million to settle similar charges, and JPMorgan Chase this past February agreed to pay $110 million. “We think [that re-ordering transactions from highest amount to lowest is] a bogus practice if it causes overdrafts,” said Linda Sherry of the advocacy group Consumer Action. However, she added, the high cost of litigation has deterred many banks from shuffling transactions and encouraged them to instead process payments in the order they were made. “Actions like this do set some precedent,” she said. “It sends a huge message to the industry.” Still, some consumer interests continue to push regulators to crack down even more on overdraft fees -- for example, by extending the consent requirements for overdraft protection to checks and by forcing banks to better explain the potential cost of signing up for coverage. “The banks go out of their way to make it sound like a wonderful thing, but it’s not,” Sherry said.
- Overdrafts Under Scrutiny: Lawsuit Claims Gate City Manipulates Debits, Checks to Maximize Fees; Bank Says 'Absolutely Not'
INFORUM 11 Apr 2012
A North Dakota bank is facing a federal class-action lawsuit alleging that it rips off consumers by re-ordering checks and debit processing so as to maximize overdraft fees. Filed on April 3, the lawsuit by Amber Pieloor claims that Gate City Bank "batch files" its checks and debit card transactions, sequencing them so that the biggest transactions are debited first. Numerous banks throughout the country are facing similar allegations. Steve Swiontek, president and CEO of the bank, insists that transactions and deposits are processed in the order in which they are received. He said the nature of the transaction can affect the amount of time it takes to post, explaining that a check or debit card transaction can be processed quickly but that debit transactions using a signature may take a couple days to clear. The lawsuit, however, claims that the actions of ordering the transactions from highest amount to lowest constitutes a breach of contract, unjust enrichment, and a violation of the North Dakota Unlawful Sales or Advertising Act. According to Center for Responsible Lending statistics cited in the court filings, financial institutions in 2008 saw a 35 percent increase in overdraft revenue over 2006.
- Stu Straus Charged $1,500 in Fees for Wells Fargo Account He Thought Was Closed
Huffington Post 09 Apr 2012
A West Orange, N.J., man was charged $1,555.61 in overdraft fees after Wells Fargo, without his knowledge, reopened an account he thought had been closed. The fees began with a $10 overdraft fee incurred in 2007, triggered by a forgotten automatic payment from UPS. The payment caused his checking account to overdraw and reopened a line of credit linked as automated overdraft protection. However, small businessman Stu Straus had believed his accounts were closed for good and was never told that he had overdue debt that was snowballing by the day. Wells Fargo eventually rescinded the fees and permanently closed the accounts, but the anecdote illustrates how difficult it is to close bank accounts in the era of electronic payments, automatic billing, and special lines of credit for overdrafts. Last month, in the wake of escalating consumer backlash, the Consumer Financial Protection Bureau set up a customer complaint forum on its Web site just for checking accounts. Currently, there is no standard regulation among banks that addresses account termination and mobility. Each of the nearly 7,000 U.S. banks writes its own account-closing rules. The burden is completely on customers; and simply informing a teller that you want an account closed is not enough. After a customer closes an account, he or she must double- and triple-check that all related automatic payments have been moved to the account, and then write a letter to the bank confirming the account closure.
- BancorpSouth Agrees to Settle Overdraft Lawsuit for $1.75M
Memphis Business Journal 09 Apr 2012
BancorpSouth Bank has agreed to a $1.75-million settlement in a class-action lawsuit involving improper overdraft fees. The bank also agreed to amend its overdraft practices. This case was settled in the U.S. District Court for the Western District of Arkansas. The suit alleged that BancorpSouth's overdraft fee assessment procedures were unlawful, though the bank denied any wrongdoing.
- TBL: Elderly Woman Bounces 70 Checks, Webster Bank Charges $2,500 in Fees
Courant.com 07 Apr 2012
While the Consumer Financial Protection Bureau is working to protect Americans from excessive bank fees and late charges, the country's elderly and low-income population continues to suffer. A situation at Webster Bank in West Hartford, Conn., highlights just such a problem. An 88-year-old customer reportedly bounced 70 checks in three months last year, each infraction triggered a penalty of $36; and instead of calling her, the bank charged her more than $2,500 in overdraft fees. Like many banks, Webster mailed out written notices to Lasalle. But the elderly woman's son-in-law said the bank never called her to inform her of the situation. The checks were written out to charitable organizations, according to her family. After receiving numerous notices in the mail, Lasalle became concerned and contacted family members. In July 2011, the bank agreed to reduce the charges by $350 and by another $150 in August. But after that, Webster said it would not reduce the charges, saying that the fees were legitimate and that it notified the customer. However, the bank said that it is reviewing its overdraft policies.
- Debit-Fee Limit Hits BofA the Hardest, Study Shows
Charlotte Business Journal 06 Apr 2012
A government cap on debit-card interchange fees has negatively affected Charlotte-based Bank of America more than any other bank in the country. According to a recent analysis by SNL Financial, the banks revenue from debit and credit-card process fees fell from $486.5 million to just $1.05 billion in the last quarter of last year. The numbers fell 32 percent from the $1.54 billion the bank earned in 2010. The bank is seeking to make up for the lost funds by charging consumers for banking services and that is expected to continue.
- Regulators Cite BankAtlantic Overdraft Protection Program
South Florida Business Journal 06 Apr 2012
The Office of Thrift Supervision recently gave BankAtlantic a rare "needs to improve" rating on its Community Reinvestment Act exam. While the exam was mostly positive, the federal regulators determined the bank engaged in illegal practices involving automatic overdraft protection. Regulators found that the company participated in illegal and deceptive practices, which negatively affected a large number of customers. However, it is unlikely that any type of penalty will be imposed.
- Comerica Customers Seek Mediation of Overdraft Dispute
Bloomberg 06 Apr 2012
Comerica Inc. customers are seeking private mediation in a lawsuit targeting the bank’s overdraft fees, according to a court filing. Mediation is "an effort to resolve this action without further litigation," according to a joint motion filed April 5 in federal court in Miami. The first session is scheduled for May 23. At least 30 banks have cases before U.S. District Judge James Lawrence King in Miami, with customers alleging that the banks shuffle debit-card transactions to maximize overdraft penalties.
- Consumer Loan Delinquency Rates Drop Across the Board
International Business Times 05 Apr 2012
Consumer loan delinquency rates fell in all 11 categories that the American Bankers Association (ABA) tracked in the fourth quarter of 2011. This indicates that Americans are reducing private debt and stabilizing their personal finances. "It's very rare that delinquencies improve in every single loan category. The last time that happened was in the fourth quarter of 2004," ABA Chief Economist James Chessen said. Despite the declines, however, loans in certain housing categories remain high compared to historic levels. The health of the jobs market also remains poor compared to pre-recession levels, though this market has seen improvements since mid-2009. The Federal Reserve's financial obligation ratio (FOR) is also below pre-recession levels. The FOR compares obligations in debt, automobile, rental, homeowners' insurance, and property tax payments to disposable personal income; it is now at the lowest level since 1984.
- TD Bank Overdraft Fee Lawsuit Certified as Class-Action Case
Bloomberg 04 Apr 2012
U.S. District Judge James Lawrence King has ruled that a claim against Toronto Dominion Bank can proceed as a class-action lawsuit. Bank customers claim that they were gouged on checking account overdraft fees. The judge certified the class in federal court in Miami. Customers claim that the bank, Canada’s second-largest lender, reordered account withdrawals to maximize fees when customers overdrew accounts. The class includes all Toronto Dominion Bank customers who had paid an overdraft fee because of the reordering, from the statute of limitations until Aug. 13, 2010. King ruled that different statutes of limitations apply in different states. The bank would not comment on the suit, but attorney Bill Kayatta argued against the certification, saying that each customer had a different situation: some knew of the bank's policy of reordering overdrafts, some learned after the overdraft fees, and some possibly never knew.
- BancorpSouth Settles Overdraft Fees Complaint for $1.75 Million
Bloomberg 28 Mar 2012
BancorpSouth Inc. has reached a $1.75 million settlement with customers who allege the company unfairly levied overdraft fees against them. According to the lawsuit, the bank had manipulated customers' transactions to trigger as many overdraft fees as possible. U.S. District Judge Robert T. Dawson in El Dorado, Ark., gave preliminary approval to the accord on March 26. BancorpSouth asked a judge in Florida, where similar cases against banks were consolidated, to halt proceedings against it until the settlement is complete. The settlement class includes more than 350,000 current and former customers of BancorpSouth.
- New: State Lawmaker Wants to Regulate Overdraft Fees
Go Local Prov 27 Mar 2012
Rhode Island Sen. James C. Sheehan (D-Dist. 36, Narragansett, North Kingstown) has introduced a bill to limit bank overdraft fees to protect consumers from added financial distress. The measure, 2012-S 2437, also would prohibit banks from charging a fee for an overdraft amount of less than $10 in a single calendar day. Banks additionally would be limited to a total of three overdraft fees per day, unless the total overdraft amount is more than $100. Another provision stipulates that banks and credit unions must allow customers to "opt in" to a program that would require debits to be taken chronologically rather than in order from largest to smallest. This would keep financial institutions from employing tactics such as shuffling transactions in order to charge as many overdraft fees as possible. "Overdraft fees may be a legitimate mechanism for banks to deal with customers who, inadvertently or otherwise, bounce a check or debit from time to time," Sheehan said. "But it should not be a mechanism to allow financial institutions to gouge their customers, and the process that many institutions are following seems like nothing more than an arbitrary, made-up procedure to collect more fees."
- Do Bank Policies Promote Extra Fees?
Click2Houston.com 21 Mar 2012
Several consumer groups claim that some banks manipulate the order in which transactions are processed to accumulate higher consumer fees. Attorney Bill Voss represents 20 bank customers in a suit against First Convenience Bank in Texas. According to the lawsuit, processing customers' debit charges out of chronological order can cause higher penalty fees if customers spend more money than what is in their accounts. If a customer with $50 left in an account makes four $10 debit charges, another $100 debit transaction would put the account over the remaining balance and incur one overdraft fee. However, if the bank processes the $100 charge first, sending the account into overdraft protection, then the customer would pay four overdraft fees for the four $10 purchases. An attorney for First Convenience Bank says that the bank processes all charges and checks at the end of every day, from the largest amount to the smallest amount, but deducts automatic bill pay before anything else. Many banks say that processing the largest amount first makes sure charges for bigger expenses, like mortgage payments, make it through, but some consumer groups doubt this explanation. "The argument that this benefits consumers is just absolutely false," said Josh Frank, a researcher for the Center for Responsible Lending. "It's confusing and it's just a way to create fees and harvest extra fees." He says that some large banks like Citi and Wells Fargo stopped reordering account charges last year, an example other banks should follow. Meanwhile, he recommends that consumers opt out of overdraft protection.
- SECU Issues Letter Supporting CFPB's Overdraft Reforms
BankCreditNews.com 20 Mar 2012
The State Employees' Credit Union (SECU) has issued a letter in response to the Consumer Financial Protection Bureau's call for public comment on overdraft practices. The letter highlights SECU's overdraft services, practices, and moderation efforts, focusing specifically on its low-cost or free options to help customers avoid overdraft fees. More than 80 percent of SECU's account holders choose the standard overdraft option, which prevents the fees associated with bounced checks. With this option, members can choose a credit card, deposit account, or open-end loan to be used as an overdraft safeguard, with a 50-cent fee charged to the overdrawn account for the service. SECU customers can avoid fees entirely by using a two-way text alert system that informs members of potential "red flags" such as a low account balance.
- Citizens Bank Boosts Checking Fees
Boston Globe 20 Mar 2012
Citizens Bank, the second-largest retail bank in Massachusetts, will make several key changes next month. Starting April 23, the bank will double the monthly charge for its Green Checking account, from $4.99 to $9.99. Customers can avoid the fee with a balance of at least $1,500 or by making five qualifying transactions, such as using a debit card, each month. The bank will also increase the monthly fee for its personal checking with interest account to $11.99 next month. An average daily balance of $2,500 or five qualifying transactions each month can prevent this fee. Other bank changes include eliminating its basic checking and its Business Partners II, III, and Plus checking accounts. Basic Checking customers will be moved to the Green Checking; business customers will be switched to the new Business Advisor Checking account. The bank will eliminate free or discounted fees for check orders for its Circle Checking accounts. According to spokeswoman Lauren DiGeronimo, these changes at Citizens Bank are part of a review that began a year and a half ago to boost profits and standardize the bank's products.
- SECU Writes CFPB With Example of Overdraft Program
Credit Union Times 19 Mar 2012
North Carolina's State Employees' Credit Union has written the Consumer Financial Protection Bureau with a description of its own checking account program and is asking the agency to consider it as a prototype for what a consumer-friendly program can look like. The 1.7 million-member, $23.6 billion credit union says more than 80 percent of its 900,000 checking account holders utilize the SECU's regular overdraft option to avoid steep fees for bounced checks. "This option provides members with the opportunity to select their deposit accounts, open-end loans or credit card to be used for automatic transfer of funds, when needed to 'pay' a checking account item," SECU wrote. "A $0.50 transfer fee is debited from the protected checking account for the service." SECU added that its members can avoid fees altogether by using text messaging or going online to transfer funds.
- Chase Lowers Fees, Bank Shifts Focus From Low Balance to High Net Worth Clients
Huffington Post 14 Mar 2012
While many of the country's biggest banks are contemplating raising fees, JPMorgan Chase recently announced that it plans to cut them. In a letter sent to customers, the bank said it will reduce its overdraft protection transfer fee from $12 to $10. The bank also said it will cut its stop payment fee from $34 to $30; and if it is done online, it will cost $25, down from $27. Chase said the new fees will take effect on March 19, 2012. Other banks continue to move in the opposite direction on fees, however, with Bank of America recently confirming plans to charge customers monthly fees on certain checking accounts beginning in May and Citibank now requiring checking account holders to maintain a minimum balance of $15,000 -- up from $6,000 -- in order to dodge its monthly fee of $20.
- Prepaid Cards, Housing Top the Week's Congressional Agenda
American Banker 13 Mar 2012
Lawmakers on Capitol Hill this week will address the prepaid card market as well as housing issues. Sen. Sherrod Brown (D-Ohio) is convening a hearing on March 14 that will focus on how prepaid card regulation might be expanded to better protect spenders. Testimony is expected from representatives of the National Consumer Law Center -- which favors better disclosure, tighter security, and limits on prepaid card fees. Sens. Robert Menendez (D-N.J.) and Jack Reed (D-R.I.), meanwhile, have scheduled a hearing the following day that is expected to examine principal reduction for Fannie Mae and Freddie Mac mortgages. "Strengthening the House Market and Minimizing Losses to Taxpayers" will feature testimony from Federal Housing Finance Agency Inspector General Steve Linick and housing expert Laurie Goodman, who believes the FHFA should support principal write-downs. Also on Thursday, Rep. Shelley Moore Capito (R-W. Va.) will hold a hearing in Las Vegas that is expected to focus on a Nevada program that uses mediation between homeowners and lenders to avert foreclosures.
- Citizens Bank, Customers Agree to Mediation in Checking Overdraft Lawsuit
Bloomberg 13 Mar 2012
Citizens Bank of Pennsylvania and plaintiffs in a lawsuit challenging overdraft fees asked for a delay in proceedings while they pursue private mediation, according to a court filing. At least 30 banks have cases pending in the same Miami court. The customers say the banks reorder debit-card transactions in their computers to maximize overdraft fees.
- Wells Fargo to Charge $7 Monthly Fee for Checking
Associated Press 08 Mar 2012
Wells Fargo customers in six states who had free checking accounts will pay $7 a month starting in May. The bank confirmed that it started shifting customers in 23 states into the $7 fee schedule last year and is expanding to six more: Georgia, New Jersey, New York, Connecticut, Delaware, and Pennsylvania. Customers can avoid the fee by maintaining a minimum balance of $1,500 or making direct deposits of at least $500 a month. They also can get a $2 break on the fee by switching to online statements. Wells Fargo said it has not offered free checking to new customers since 2010. It intends to expand the fee to all 39 where it has branches, although it did not offer a timetable. For customers, the fees add up. Personal finance Web site NerdWallet said it found that customers who fall short of the minimum balance and other requirements are charged an average of $110 a year by the five largest banks. Consumer advocates are up in arms over the fees, especially considering the nation's steep rate of joblessness. "Banks don't realize they are going to lose much more in the way of lost customers than they are going to make on these ridiculous fees," said John Tschohl, a customer service expert who consults with banks.