Bank overdraft fees have become the focus of increased scrutiny as consumers challenge practices that can multiply charges on checking accounts. Bank of America has agreed to settle a class action lawsuit involving its previous method of processing debit transactions and assessing overdraft fees.
The lawsuit alleged that processing transactions from largest to smallest rather than chronologically could cause balances to decline more quickly, potentially triggering additional fees. Although Bank of America has since changed its overdraft policies, the settlement puts another chapter in the broader debate over overdraft practices, disclosure, and consumer protections.
Bank of America decided to put the past behind them when they agreed to settle a class action lawsuit over their previous overdraft practices.
In a November 2009 complaint filed with the Miami court, customers said Bank of America routinely processed debit transactions from largest to smallest rather than in chronological order, causing account balances to fall faster and boosting potential overdraft fees. They said the bank also did not clearly tell customers they could decline overdraft protection, and typically charged the fees to debit card users rather than decline transactions.
Pointing out that the bank has since changed their overdraft fee policy to eliminate these fees altogether (and had fully accrued for the settlement) the message was clear – let’s move forward. The last thing any of these banks need is another distraction, and regarding overdraft fees, it would be hard to believe their side would prevail. Best to say goodnight Irene – and move on.
The Bank of America settlement illustrates the potential financial and reputational consequences associated with bank overdraft fees and transaction-processing policies. For financial institutions, clearly communicating overdraft options and ensuring that fee practices are transparent can be important components of maintaining customer trust.
As banks reconsider how they handle overdrafts, changes to these policies could also affect the economics of checking accounts. Moving away from controversial practices may help institutions reduce regulatory and legal concerns while allowing them to focus on strengthening their relationships with customers.
Read full article here: http://www.reuters.com/article/2011/02/05/us-bankofamerica-overdraft-settlement-idUSTRE71423420110205