Bank of America Reaches $75 Million Settlement in Overdraft Fees Lawsuit
Bank of America has reached a preliminary settlement in the class action lawsuit which accuses the nation's second-largest bank of obtaining overdraft fees from its customers who held savings and checking accounts, fees which it did not earn. The preliminary settlement was filed in the bank's home base of Charlotte, North Carolina, and will require Bank of America to pay $75 million.
In the class-action lawsuit filed against the bank, the plaintiffs claimed that Bank of America charged more than one $35 insufficient funds fee or “NSF Fee” and $35 overdraft fee “OD Fee” during the same transaction. The plaintiffs also argued that the bank would re-process the transaction repeatedly. The complaint states that Bank of America did this even though their user agreements state that they will charge only one fee and only one type of fee per charge.
The plaintiffs went on to argue that Bank of America “assesses fees on payments or attempted payments to itself, even when it knows such transaction attempts will be futile and its contracts do not authorize such fees.” The complaint explains that fees were prematurely taken out from accounts that were already empty. The plaintiffs also argued that the bank charged monthly service fees to savings accounts even though the company states that they will waive fees for savings accounts that have a certain number of transfers take place.
Overdraft Fees Target Struggling Americans
Overdraft fees and their excessive use by banks have been a topic of controversy over the past couple of years. According to the Center for Responsible Lending, there was almost $12 billion of revenue generated by banks because of overdraft fees.
According to Forbes, overdraft fees average about $25.38 per fee. Online banks tend to have the lowest fees at about $20, while intuitions like Bank of America have fees that run around $35 per transaction.
The Financial Health Network took a look at how overdraft fees and other banking fees disproportionately impact those who are already struggling. They explain that lower-income households (households that make 80% less than the median income for the area) spent over $127 billion on bank fees and interest associated with financial institutions in the past year.
In their FinHealth Spend Report 2021, the group details that struggling households paid over $255 billion in fees related to their financial institutions which are 84% of the total national spending despite the fact that they make up 64% of the population. When compared to non-lower-income households, individuals from lower-income households are 1.8 times more likely to pay overdraft fees. Their report also highlights that “43% of Financially vulnerable households with checking accounts report having overdraft in the past year, with 9.6 overdrafts on average.”
Bank of America has been at the center of controversy on multiple occasions because of its overdraft fee practices. Although Bank of America has agreed to settle this case, the company denies any wrongdoing on its part. As a result of the settlement, lawyers for the plaintiffs are seeking $25 million for attorney's fees.
The case is Morris et al v. Bank of America NA, U.S. District Court, Western District of North Carolina.
