More than a million Bank of America Corp. customers who overdrew their checking accounts could recoup some overdraft fees following a settlement that received initial approval from a federal judge on Monday.
The settlement, reached in Miami federal court, calls for the bank to put $410 million in an escrow account that will be divided among people who where charged overdraft fees because of checking-account or debit-card transactions as early as 2001.
According to a court document, the attorneys' fees could be up to 30% of the settlement.
The law firm in the case says well over one million consumers will receive a part of the payment.
The bank will be searching through all customers, not just those involved in the suit, the firm said.
The settlement had been reached in early February, but court documents at that time included little detail.
Bank of America and several other large banks faced a series of lawsuits that were consolidated in Miami federal court. The consolidated suit alleged the bank "systematically" resequenced debit transactions in order to maximize the bank's overdraft fee revenue.
Many banks allegedly used a system in which debit transactions were recorded with the largest transaction first, not in chronological order, thereby leading a customer's account to dwindle faster.
The bank denies the allegations in the settlement.
A Bank of America spokeswoman reiterated on Monday it was "pleased to reach a fair resolution to this matter" and was "advocating for a standard solution that would ensure a consistent posting order approach across the industry."
Jeremy Alters, of Alters Law Firm, which represented the plaintiffs, said the resequencing of debit-card transactions was done by more than 30 banks and that he intends to get consumers more.
Mr. Alters said he couldn't comment on whether other banks were settling, but that he hoped they would.
"They have been wronged," Mr. Alters said of consumers, adding the settlement "is a blueprint for success."
Among the other banks named in the consolidated lawsuit were Citigroup Inc., JPMorgan Chase & Co. Wells Fargo & Co., U.S. Bancorp, SunTrust Banks Inc. and Huntington Bancshares Inc.
Other banks have reached settlements on similar cases. Fifth Third Bancorp settled a case last year and a federal judge in California ruled against Wells Fargo.
New federal regulations have forced the banks to change overdraft tactics on debit cards. The fees are usually heavy charges made when customers spend more than is in their account at the time.
The situation was often described as "a $38 cup of coffee" — that is, a consumer who mistimed the purchase of a $3 cup of coffee would find a $35 overdraft fee tacked on.
The new regulations say that banks can't charge overdraft fees on debit cards without first getting customers' approval. Some banks have pushed aggressively to get their customers to "opt-in" to overdraft fees.
But Bank of America decided to do away with the ability to overdraft with a debit card, rejecting purchases at the point of sale.
