Bank of America has agreed to pay $410 million to settle a class-action lawsuit that accused the nation’s largest bank of manipulating customers’ debit card accounts to generate billions of dollars in extra overdraft fees. The bank admitted no wrongdoing, but customers who lost money to the practice will receive partial refunds.
The agreement could put a little money back into the pockets of 13 million people.
“It’s really undisputed that this is one of the largest settlements ever in a consumer case,” Aaron Podhurst, one of the lead attorneys in the case, told the Associated Press.
According to the lawsuit, beginning in 2001 Bank of America changed the way it processed debit card purchases. Instead of recording them as they happened, chronologically, the bank started processing purchases by dollar amount, charging the largest purchases to customers’ checking accounts first.
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The practice increased the likelihood that customers would overdraw their accounts, as well as the number of times they were likely to overdraw. For example, if someone bought a pack of gum, then box of band-aids and finally a flat-screen television, BofA would process the TV purchase first. If that was enough to overdraw the account, then the bank would charge overdraft fees of about $35 apiece for the gum and the band-aids.
“This automatic, fee-based overdraft scheme is intentionally designed to maximize overdraft revenue for Bank of America,” according to the complaint, “as part of its inequitable motive to generate obscene profits….”
Bank of America admitted that it processed large purchases first, but denied that the practice was wrong or illegal. Members of the class do not need to do anything to receive payment. Those who still have Bank of America checking accounts will have the money credited to them automatically, while those who have left the bank will receive payment by mail, according to a website set up to answer questions about the suit.
Image: Paul Lowry, via Flickr.com