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A flood of overdraft cases has streamed into the Miami courtroom of U.S. District Judge Lawrence King over the past two years, but a panel of federal judges may have turned off the spigot last Friday.
October 24 -
Banks have long argued that processing debit card transactions by starting with the largest dollar balances and working their way to the smallest benefited customers. Here's an alternate explanation of what might have motivated them: "Multiple Millions $$$$$$$$$$$$$$$$$$$$."
September 26 -
Now that Bank of America has bought itself out of a massive class action over the sorting of overdraft fees, its fellow banks need to decide if they hold an advantage that B of A did not.
May 24
The price of settling overdraft fee litigation may be going up. That's the message in Union Bank's agreement last week to
That litigation alleges that about 30 bank-defendants manipulated the order in which customers' debit card payments were processed in order to maximize the fees it charged.
The settlement's dollar value is a fraction of the $400 million that Bank of America has agreed to pay to settle similar allegations. However, it amounts to a far higher percentage of the alleged damages to customers.
Plaintiffs gave the court notice of the agreement to settle the case last Wednesday. The existence of the filing was reported by Bloomberg on Friday.
"I'm glad that Union and the plaintiffs' executive committee could come together and settle this case," says Aaron Podhurst, an attorney leading the plaintiffs executive committee. "It's a good thing for the class to get this behind it and good for the overall litigation. Courts appreciate it when you settle these matters when you can."
Union Bank
Emails unsealed in the case suggested that some of bank's own employees and executives were "philosophically" opposed to manipulating the order the bank processed customer payments and believed that the practice fell hardest on "poor but honest" customers. Despite those concerns, the bank instituted a re-sequencing program after determining that doing so would earn it millions of dollars in fee revenue.
The precise terms of the settlement won't be available for several weeks, but the face value appears to be around 40% of alleged damages. The company expected to earn about $17 million a year in extra fees by re-sequencing customer payments, according to Union Bank documents unsealed last month. The suit covers a time span of five years.
Under the proposed settlement of the Bank of America case, plaintiffs will recover less than 10% of alleged damages. Circumstances unique to B of A — including the existence of a prior settlement that the plaintiffs attorneys would need to overturn — likely contributed to the smaller proportionate recovery. A former member of the plaintiff attorneys' executive committee has challenged the settlement as inadequate, however.
The Union Bank case may have been simpler. Plaintiffs had already received class certification and defeated a subsequent appeal on the matter.
"We believe with the court rulings that are coming down, we're going to try to convince the banks to pay 60% or 70%, give or take," Podhurst says. "But every case is separate."
