The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- Wisconsin Bank Settles Overdraft Case, Joins BofA
Thomson Reuters News & Insight 28 Nov 2011
A subsidiary of Associated Banc-Corp, a lender based in Wisconsin, has agreed to pay $13 million to settle consumer litigation accusing it of charging egregious overdraft penalties. The deal by Associated Bank NA, revealed in a Nov. 28 filing with the U.S. district court in Miami, requires approval by U.S. District Court Judge James Lawrence King. Earlier in November, Bank of America Corp. won final approval of a $410 million settlement of similar charges. Union Bank, an arm of Japan's Mitsubishi UFJ Financial Group Inc., reached a $35 million settlement in November; while BOK Financial Corp., the parent of Bank of Oklahoma, reached a $19 million agreement, court records reveal. In the lawsuit, consumers alleged that lenders routinely processed transactions from largest to smallest instead of in chronological order.
- BOK Settles Overdraft-Fee Lawsuits
Tulsa World 24 Nov 2011
BOK Financial Corp. has entered into a $19 million settlement on a trio of class-action lawsuits that challenged the bank's handling of electronic debit transactions and overdraft fees. The Tulsa-based company said in a Nov. 23 statement that it chose to settle the lawsuit and resolve the litigation to circumvent any additional expense or distraction it has caused. The initial lawsuit, filed against BOK Financial and Bank of Oklahoma in August 2010, alleged that the bank altered the order of customers' electronic debit transactions to increase the number of overdraft fees. According to the complaint, BOK allegedly reordered electronic debit transactions from the highest dollar amount to lowest dollar amount, which wiped out customers' available funds as quickly as possible and maximized the number of overdraft fees.
- Angry Churches Pull Money From Big Banks
Washington Post 23 Nov 2011
A small but growing number of religious communities across the United States are removing their money from Wall Street banks to protest what they view as unfair mortgage foreclosures and unwillingness to lend to small businesses. The New Bottom Line (NBL) coalition of congregations, community organizations, labor unions, and individuals is promoting a "Move Our Money" campaign with the goal of shifting $1 billion from big banks to community banks and credit unions. "In a way, the banks have divested from our communities, especially communities of color," noted the Rev. Ryan Bell, a Seventh-day Adventist pastor in Los Angeles. "So we're basically telling Bank of America that we want them to invest in our communities, and until they do that we're not going to give our money to them." Bank of America is singled out by the campaign, along with Wells Fargo and JPMorgan Chase, for failing to do enough to modify mortgages and avert foreclosures and for tightening the purse on small business lending. Wells Fargo, for example, is accused by the movement of performing loan workouts for only 22 percent of qualified borrowers under a federal program by the end of 2009. It also has not amended its foreclosure practices "despite many confirmed reports of 'robo-signing' and other illegal practices," according to the coalition. As of Nov. 21, $55 million reportedly had been switched from the big banks to smaller institutions. To encourage more divestment, NBL expects to roll out legislation in 50 or more U.S. jurisdictions that would move taxpayer money out of big banks.
- Banks' Accounting Boosts Overdraft Fees
Washington Times 23 Nov 2011
A consumer research organization is taking banks to task for continuing to rely on what it says is a deceptive accounting practice that can amplify the number of overdraft fees a customer may incur. In a report issued in late November, the Pew Charitable Trusts said that bank customers are still getting hammered by additional overdraft charges despite the passage of recent federal financial reforms and a host of class-action lawsuits targeting some of the country's largest lenders. Critics say financial institutions can change the order in which they process customer debits and withdrawals, effectively causing the account holder to trigger the overdraft-protection fees multiple times. According to Pew's findings, the strategy reduces the funds in the account more quickly and maximizes the number of overdraft penalties customers will have to pay. "The burden here should not be on the consumer, if the bank is reordering transactions in this way," said Ardie Hollifield, a project manager at Pew. "This necessarily will create more overdraft charges. It's inherently unfair." While banks have drawn criticism for the practice, it is not actually illegal. And while some have abandoned the policy, they reserve the right to return to their old way of doing things at any time.
- Bank Debit Card Fees Under U.S. Justice Department Review
Bloomberg 22 Nov 2011
The U.S. Justice Department is conducting an antitrust review of statements and actions by banks and their trade associations about imposing fees on customers who use debit cards. Assistant Attorney General Ronald Weich described the review in a letter released by Rep. Peter Welch (D-Vt.), who along with four other House Democrats had requested an investigation. "While big banks like Bank of America beat a hasty retreat on their debit card fee strategies, I have no doubt that they will continue their quest to dig deeper into the pockets of struggling consumers," Welch said in a statement. "As they consider their next move, they should be aware that there is a cop actively on the beat."
- Banks Face Scrutiny Over Debit Card Fees for Jobless
American Banker 15 Nov 2011
Some of the country's biggest banks have discovered a lucrative loophole in recently implemented debit fee rules: the benefit cards paid to unemployed and disabled Americans are exempt from the oversight. As state governments increasingly make the switch from issuing checks for benefits to depositing them onto prepaid cards, some banks have found a new profit source. Meanwhile, criticism of the lack of regulation of the cards is escalating. Benefits cards are not subject to debit interchange rules that limit transaction fees at 24 cents. Additionally, many states receive kick-backs from the banks as part of a revenue-sharing agreement. However, the unsavory deals come with a price -- added fees and reduced access to funds for the unemployed and disabled. The shift has received national attention, with consumer advocates blasting revenue-sharing agreements and high fees.
- TCF Bank Under Fire for Overdraft Fees
NBC Chicago 15 Nov 2011
TCF Bank customers in the Chicago area have responded angrily to a new overdraft policy, blasting it as everything from "unreasonable" and "ridiculous" to "predatory." The policy, which went into effect in October, changes how a customer is charged for an overdrawn account. Instead of the previous $35 fee per transaction, the bank now debits an overdrawn account every day for up to two weeks straight -- unless or until the customer restores the balance to zero. The change has triggered as much as $392 in fees for a single overdrawn debit in at least one case. The bank's customers say there were not notified of the new policy, although TCF insists that it reached out to account holders in several ways -- including by mail and online.
- Banks Quietly Ramp Up Costs to Consumers
New York Times 14 Nov 2011
Though major banks have publicly backed away from charges for debit card use, many are quietly adding or hiking other fees. New fees have been attached to such services as replacing a debit card, making a deposit via cell phone, or having money wired to an account. Meanwhile, bank customers are paying more for paper statements and ATM withdrawals. Banks also are making up for profit losses from reduced overdraft charges and lower swipe fees for debit cards by raising minimum balances for accounts and increasing charges on the use of a checking account. Further, financial institutions are making it more difficult to qualify for fee waivers. Two senators this month pressed the Consumer Financial Protection Bureau to develop a more consumer-friendly disclosure form for account fees. "Simply put, consumers have had enough of banks that try to sneak fees past them that are hidden in fine print or imposed with no notice at all," they wrote.
- More Banks Processing Transactions by Date
InsuranceNewsNet 11 Nov 2011
Fifth Third's recent settlement of a class-action lawsuit could alter the way some financial institutions process customers' monthly transactions. The Cincinnati-based bank agreed in August to set up a $9.5 million fund to refund customers who accused it of erroneously charging them overdraft fees by "re-sequencing" debit card and ATM transactions. The federal suit claimed Fifth Third recorded larger transactions first, despite the order in which they occurred, in order to trigger the maximum number of overdraft fees possible. According to a 2009 study by the Federal Deposit Insurance Corp., a customer with $50 in an account who completes a $100 transaction and four $10 transaction would incur five overdraft charges by a bank processing in order from largest to smallest; but that same customer would be hit with just one overdraft by a bank processing from smallest to largest. Although Fifth Third admitted no wrongdoing and said it settled to avoid the cost of litigation, the bank revamped its processing practices so that transactions now are posted in chronological order. While the FDIC study discovered that, among the larger banks polled, more than half posted transactions from largest to smallest, more banks are likely to follow in Fifth Third's footsteps in light of the settlement. "You're potentially creating a problem for yourself [if you don't]," warns Indiana Bankers Association President and CEO Joe DeHaven.
- Bank of America Scraps Overdraft Idea
Boston Globe 10 Nov 2011
Bank of America planned to test an overdraft program in 2012, in which customers would receive a text message indicating that there is not enough money in their accounts to make the purchase and then allow them to decide whether to decline the purchase or pay a $35 overdraft charge. However, the company has scrapped the plan. "We did not test it, and there are no plans to move forward at this time," says Anne Pace, a spokesperson for Bank of America. Experts say most customers would not take on a $35 fee for a small debit card purchase. Consumer advocates say it is easy for consumers to accidentally overdraw their accounts and generate numerous fees. "Sometimes, you think you have money in your account, and you don't," says Center for Responsible Lending spokeswoman Kathleen Day. Banks are now required under federal regulations to obtain customers' permission before charging overdraft fees on debit and ATM transactions. Bank of America, HSBC, and Citibank eliminated overdrafts on debit card transactions altogether, whereas some major banks request customers to grant blanket permission to charge overdraft fees.
- High Bank Fees Give Wal-Mart a Money Aisle
New York Times 08 Nov 2011
Wal-Mart is benefiting from the customer dissatisfaction with high fees in the banking industry, with an increase in consumers at its Money Center. Over 1,000 Wal-Mart stores across the country have a dedicated Money Center where they offer small financial services, like check cashing, bill pay, wire transfer, or prepaid debit cards; while others offer the same services at the customer service desk. Though Wal-Mart had attempted to gain a federal bank-charter in the past, it has indicated no desire to renew attempts to earn a charter. A Center for Financial Services Innovation official has expressed approval at the increased competition Wal-Mart brings to the non-bank sectors with its competitive fees on financial services it sells on behalf of financial firms. The president of the Consumer Bankers Association has expressed concern over the lack of regulations, a point he has discussed with the Consumer Financial Protection Bureau, which is examining ways to regulate non-bank entities that offer financial services.
- Union Bank to Settle $35 Million Overdraft-Fee Litigation
Bloomberg 04 Nov 2011
According to a filing in a federal court in Miami, Fla., Union Bank will pay $35 million to settle a lawsuit over its overdraft fee policy. Customers filed more than 30 suits nationwide claiming that more than 30 banks process checking account debit card transactions out of chronological order, in a high-to-low sequence, in an attempt to maximize overdraft fees. Many banks have begun making settlements. Court documents show that a written settlement for Union Bank will be submitted to the court in approximately 45 days. The agreement covers 350,000 non-commercial customers who were charged overdraft fees from January 2005 to August 2010 as a result of "resequencing" of checks," according to plaintiffs' attorney Aaron S. Podhurst.
- One Voice Helped Void Bank's Fees
Columbus Dispatch 04 Nov 2011
Molly Katchpole, a recent college graduate from Rhode Island who currently lives in Washington, D.C., has a couple thousands dollars to her name and currently works two jobs. So when Bank of America announced about a month ago that it would begin charging debit card users $5 a month, Katchpole got angry. She put up an online petition through Change.org, a nonpartisan Web site that allows individuals and advocacy groups to launch campaigns. Soon, more than 300,000 people had signed the petition; and on Nov. 1, Bank of America backed down. Now, the 22-year-old is getting the credit. "When I first started the petition, and even now, people were saying, 'Just close your bank account and go to another bank.' I think people are forgetting that not everybody can easily close their bank and join a credit union. There are some neighborhoods in this country where there's only one bank," Katchpole said. Katchpole credits her victory to good timing, calling it "stupid" for Bank of America to announce the fees during the Wall Street protests.
- Banks Likely to Try Range of New Fees
Boston Globe 03 Nov 2011
Although Bank of America and other major banks have eliminated debit card fees, experts say consumers should expect them to introduce new fees and hike existing fees as they seek to recover losses tied to the economic and housing downturns and stricter regulations. "The debit card fee was only one of several different levers that banks can pull," says Bankrate.com analyst Greg McBride. "Consumers should continue to be vigilant about the prospect for new and higher fees." Bankrate.com says banks already have hiked checking account fees, with the average monthly fee rising 76 percent over the last year to $4.40, and ATM surcharges, with the average up 3 percent to $2.40 per withdrawal. Experts say banks will raise monthly checking account fees or minimum balance requirements, boost overdraft charges, and hike fees for processing paper checks or mailing paper statements. Meanwhile, consumers will see banks pull back on their rewards programs or roll out a bundle of services for a monthly fee.
- Senators Want Banks to Simplify Checking Account Fee Disclosures
Los Angeles Times 03 Nov 2011
U.S. Sens. Dick Durbin (D-Ill.) and Jack Reed (D-R.I.) are calling on banks to voluntarily adopt a standardized, easy-to-understand disclosure form -- like the one proposed by the Pew Charitable Trust -- to help consumers compare bank fees. The Pew Charitable Trust's one-page disclosure form details basic checking account terms and conditions, such as ATM, overdraft, and account closing fees. Durbin and Reed are urging Consumer Financial Protection Bureau (CFPB) acting director Raj Date to force banks and credit unions to display such disclosure forms on their Web sites. "A checking account is a critical, valuable product for millions of Americans. But checking accounts and debit cards often come with unexpected costs and fees that can quickly add up," says Date. "With upfront and easy-to-understand information, consumers can comparison shop for the best deal for them." Although Date says the CFPB will push for more transparent checking account fees, it is uncertain whether he will call for a rule or a voluntary agreement with banks.
- Suit: First Midwest Shuffled Records to Increase Overdraft Fees
Chicago Tribune 02 Nov 2011
A class-action lawsuit has been filed against First Midwest Bank of Itasca, Ill, accusing it of processing checking account transactions in a way that maximized the number of overdraft fees incurred. According to the complaint, the bank deliberately posted higher-amount debits before lower-amount ones and also deducted debits before credits were applied. Plaintiff Laura Barnes of Indiana would have been hit with a single overdraft charge of $35, instead of three for a total of $105, "if First Midwest had not manipulated and re-ordered [her] transactions … and if First Midwest had not deducted the debit transactions prior to applying the deposit," said her attorneys. Additionally, they said First Midwest did not adequately inform customers of their right to opt out of overdraft coverage -- in which case a transaction would be rejected, but the customer would not trigger fees for overspending. The suit is petitioning for class-action status and is seeking unspecified damages and restitution.
- Customers Would Abandon Debit Cards to Avoid Fees: Survey
American Banker 02 Nov 2011
According to a study released on Nov. 1 by the National Foundation for Credit Counseling, only 3 percent of U.S. bank customers would continue to use their debit card if a fee were associated with it. The survey found that 22 percent of customers would pay with cash, while 62 percent would switch banks to one that does not charge for debit cards. Additionally, the October survey found that 8 percent of consumers would pay with checks and 5 percent would use their credit cards instead. Several big banks backed off their plans to levy the fees on consumers due to outrage by the American public.
- Debit-Fee Retreat Complete
Wall Street Journal 02 Nov 2011
Just one month after Bank of America announced that it would charge some debit card customers a $5 monthly fee to use their cards for purchases, the banking giant reversed its decision. The move came after four other major U.S. banks retreated on their plans to charge a similar fee after encountering significant opposition to the fees by customers across the country, who flooded customer service departments and branch managers with complaints. "We have listened to our customers very closely over the last few weeks and recognize their concern with out proposed debit usage fee," said David Darnell, co-chief operating officer at BofA. The back-pedal on debit card fees represents a win for consumers, but other bank fees are expected to surface as the finance sector tries to find a way to recoup some of an estimated $2 billion annually it is expected to lose as a result of new federal restrictions on debit cards. Already, they have largely eliminated free checking and ended rewards programs for the cards; the next steps may be to hike existing fees on checking accounts, find new areas for additional charges, and adopt more internal cost-cutting.
- Retreat From Debit-Card Fees Continues
Wall Street Journal 01 Nov 2011
SunTrust Banks Inc. and Regions Financial Corp. said they will stop charging customers for making purchases with debit cards, signaling the latest industry drawback from a monthly fee that elicited an outraged response from customers. The announcements follow decisions in late October by Wells Fargo and J.P. Morgan Chase to drop customer testing of the new fees. Together, the banks run an estimated 15,000 U.S. branches, while controlling more than $2.2 trillion in deposits and $1.6 trillion in loans -- more than 20 percent of the entire sector. The sudden retreat by the four big banks represents a rare concession to customer ire over lucrative fees. Pummeled by a soft economy and tightening regulations, banks have been adding fees on services -- charging, for example, for many checking accounts that were once free. But none of those moves seems to have generated the fierce response of the debit card fee. "Consumers have clearly said this is a no-go," said Patricia Hewitt, who specializes in debit cards at Maynard, Mass.-based Mercator Advisory Group Inc. The moves leave Bank of America as the only major bank that is still planning to impose the fee on some customers next year.
- Durbin Calls on Banks to Release Earnings From Fees
The Hill 31 Oct 2011
Sen. Dick Durbin (D-Ill.) is calling on the nation's largest banks to disclose how much they make in fees, especially those earned from consumers credit card usage. Durbin wants banks, which he says are now pushing customers toward credit card use where merchant fees remain unregulated, to release in monthly statements how much they make in unregulated interchange fees. The lawmaker said he was pleased and even surprised to see banks reversing their decision to charge a monthly fee for using debit cards, but added, "It's not over by a long shot. ... The big banks still have enormous power and resources and they're going to continue to find ways to make money at the expense of their customers."