Bank of America Class Action Challenges Stop Payment Fees

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UPDATE:

• The Court dismissed this case with prejudice on Dec. 18, 2019.

Bank of America NA has been hit with a class action lawsuit accusing it of imposing fees and other barriers for consumers seeking to discontinue recurring electronic funds transfers from their checking accounts.

“For consumers who authorize recurring electronic funds transfers (‘EFTs’) from their checking accounts–for anything from gym memberships to loan payments–federal law provides a very important right: upon notice to his bank that a consumer no longer authorizes the recurring debits, his bank is obligated to immediately cease such debits,” the Bank of America class action lawsuit says.

Plaintiff James Foreman claims BofA imposes hurdles on its customers who seek to end their EFTs from checking accounts, such as imposing hefty fees before the right to discontinue the recurring fund transfers.

“This federally provided right to end recurring EFTs is especially important for consumers who unwittingly fall into predatory and illegal internet payday loans,” Foreman alleges in the BofA class action lawsuit.

Foreman specifically points to payday loans and high-cost installment loans, which allegedly “trap consumers into debt they cannot afford.”

According to the BofA class action lawsuit, lenders of these so-called “payday debt traps” require consumers to provide their bank account information and to provide authorization to debit future payments from the account.

The Bank of America class action lawsuit points to California laws that restrict payday loans. Under California law, only lenders who are licensed by the Department of Corporations and who abide by the interest and fee limits may make payday loans. Further, California law caps the amount of the loans and the amount of fees the payday lender can charge.

Foreman alleges that certain payday lenders use the internet to circumvent California law and offer payday loans to California residents, which may feature interest rates as high as 500 percent or higher.

The federal Electronic Funds Transfer Act also reportedly provides consumers with the right to discontinue authorization for recurring EFTs of loan payments.

However, Bank of America allegedly charges its account holders a fee of $30 to terminate their authorization of recurring EFTs. The BofA class action lawsuit refers to these fees as “Stop Payment Fees,” or SPFs.

Foreman claims he was a victim of a predatory lending scheme, and notified Bank of America that the lenders were no longer authorized to withdraw funds from his account. According to the BofA class action lawsuit, Bank of America informed Foreman that it would only stop the payments if he paid a $30 Stop Payment Fee for each allegedly illegal loan.

“Plaintiff had no choice but to pay this fee if he was to escape from the illegal debt trap in which he found himself,” the BofA class action lawsuit says.

The Bank of America class action lawsuit was filed on behalf of Foreman and a proposed Class of all BofA checking account holders who incurred at least one stop payment fee to discontinue recurring electronic funds transfers. Foreman also seeks to represent a subclass of Class Members who hold Bank of America checking accounts in California.

Foreman is represented by Jeffrey D. Kaliel and Sophia G. Gold of Kaliel PLLC.

The Bank of America Stop Payment Fees Class Action Lawsuit is James Foreman v. Bank of America NA, Case No. 5:18-cv-01375-NC, in the U.S. District Court for the Northern District of California, San Jose Division.