Bank of America Corp agreed to pay $ 75 million to settle a lawsuit accusing the second-largest US bank of extorting overdraft fees it did not earn from customers with savings and checking accounts, court papers showed.
The initial settlement of the proposed class action was filed with the federal court in Charlotte, North Carolina on Wednesday, where the bank is based, and required the approval of a judge.
Customers said Bank of America often charges several $ 35 for insufficient funds or overdrafts on a single transaction, sometimes reflecting the bank’s repeated attempts to process it at the request of a merchant.
One woman said that the bank had asked her for $ 105 after she declined her $ 20 credit card payment and then tried to “retry” the same payment five and nine days after the initial rejection without her knowledge, resulting in three $ 35 charges.
Plaintiffs’ attorneys said that as part of the settlement, Bank of America would stop levying multiple fees on “retry” payments for at least five years, leaving customers with an estimated $ 5.3 million a month in total and $ 318 million total.
Bank of America denied wrongdoing in agreeing to a compromise. A spokesperson declined to comment on Friday. The plaintiff’s attorneys intend to seek up to $ 25 million in settlement fees from the settlement fund. Repeated overdrafts can result in account closures and some may leave low-income customers without access to banking services. Banks have faced several lawsuits over the past few years, claiming that they have illegally sought to maximize overdraft fees.
According to the Center for Responsible Lending, US banks incurred overdraft fees of $ 11.68 billion in 2019, before the COVID-19 epidemic left millions in financial distress. The nonprofit said that only 9% of account holders paid 84% of the fee.
Source: Reuters