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New Class Action Investigation Targets Bank of America Overdraft Fees

By Anne Bucher

While the checks have already been sent for the Bank of America overdraft class action settlement that was resolved in November 2011, a second class action investigation into similar allegations is set to begin.

In 2011, a judge approved a $410 billion class action settlement to resolve complaints that Bank of America manipulated debit card transactions by allowing transactions to take place even when the customer’s bank account had insufficient funds to cover the cost. Bank of America would charge an overdraft fee for the transaction of $25 for the first overdraft of the calendar year and $35 for each subsequent charge. The bank would also reorder debits from the highest to the lowest to maximize the number of overdraft fees it would collect.

According to a 2013 report by the Consumer Financial Protection Bureau (CFPB), 61 percent of bank profits come from insufficient fund and overdraft fees. These fees cost the average consumer $225 per year, according to the CFPB. The banking industry has raked in significant profits from overdraft fees. Last year, the industry made more than $22 billion from the practice.

Consumer advocacy groups have called for an outright ban on overdraft fees, claiming that it doesn’t make sense for customers to be able to withdraw more money than they have in their bank accounts. Before debit cards, banks would sometimes allow customers to use checks even when they did not have sufficient funds to pay for a transaction as a courtesy to customers in good standing. Because it sometimes takes checks several days to clear, the recipient of the check could not be certain that the customer had sufficient funds until after the transaction took place.

Consumer advocacy groups argue that there is no longer any justification for banks to allow customers to take out more money than they have in their accounts because debit card transactions authorize instant deductions from the bank account. If the customer has insufficient funds at the time of the transaction, the transaction could easily be declined. However, many banks allow these transactions to proceed as if the customer has sufficient funds in the bank account. Advocacy groups argue that banks should be required to warn customers that a fee may be imposed and not allow the transaction to go through until the customer has approved the transaction.

After being targeted by numerous class action lawsuits, many banks have changed their overdraft fee policies. Bank of America now offers a program called Overdraft Protection. When customers opt in to this program, they can link their debit card to a savings account or credit card to help them complete a debit card purchase. The bank will charge $10 per day when is necessary to transfer funds from another account.

Consumer advocates investigating a potential new class action lawsuit claim that Bank of America’s overdraft fees were deceptive and unfair to its customers. Potential members of the class action lawsuit include people who have been charged an overdraft fee by Bank of America after June 1, 2011. Even if you participated in the earlier class action settlement, you may still be eligible to participate in the new class action lawsuit. Learn more at the Bank of America Overdraft Class Action Lawsuit Investigation .

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Updated July 29th, 2013

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