Citibank Reaches $7.9M Overdraft Fee Class Action Settlement

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Citibank has reached a $7.9 million class action settlement with customers who accuse the bank of charging unfair overdraft fees on debit card transactions.

Plaintiff Ronald Arendas filed a motion on Feb. 14 to have the Citibank overdraft class action settlement approved, which will pay customers between $5 million and $7.9 million in refunded overdraft fees. The class action settlement was reached in mediation with Citibank after nearly three years of legal battle.

“Plaintiff and his undersigned counsel believe the settlement to be in the best interests of the settlement class and wish to begin the court approval process that is required for all class action settlements,” the motion states.

A preliminary approval hearing has been scheduled for March 21, 204. If approved, the Citibank overdraft settlement will include all Citibank customers who had accounts with the bank in the United States from Nov. 7, 2004 until July 1, 2010, and incurred at least one overdraft fee based on the bank’s allegedly improper policy of posting debit transactions from highest to lowest, rather than in the order they occurred, to rack up overdraft fees.

Arendas filed the Citibank overdraft class action lawsuit in December 2011, alleging that he was charged a number of overdraft fees on debit card transactions because Citibank delayed posting his purchase, even though he had enough money to cover the transaction when the purchases were first made.

Arendas claimed that he was charged hundreds of dollars in overdraft fees from Dec. 6, 2004 until the time that he filed his class action lawsuit, and believed that his allegations were “representative of millions of dollars of overdraft fees Citibank wrongfully assessed and deducted from Citibank customer accounts.”

Overdraft fee policies have come under fire in recent years, resulting in over 30 banks facing class action lawsuits over similar problems. The bank overdraft lawsuits were consolidated into multidistrict litigation pending as In re: Checking Account Overdraft Litigation, Case No. 1:09-md-02036, in the U.S. District Court, Southern District of Florida.

One policy that has especially been a problem for consumers is when banks allegedly reordered debit card transactions — a practice known as re-sequencing, in which the financial institution waits until the end of the day to calculate overdraft fees and deduct the largest transaction first so that it can charge more fees on the smaller transactions.

U.S. Bank, Bank of America, JP Morgan Chase, TD Bank, PNC Bank and Royal Bank of Scotland Group’s Citizens Financial have all paid massive settlements in similar overdraft class action lawsuits in recent years, ranging from $55 million to $137.5 million.

Citibank asked for Summary Judgement on the class action lawsuit based on the argument that customers had 30 days to file a complaint, which U.S. District judge Charles Breyer denied in January 2013, saying that 30 days was unreasonable.

“I think it’s unconscionable to enforce this against a consumer under these circumstances,” Breyer wrote in his denial. “That’s one reason I deny summary judgement. I don’t have to give an opinion as to [how many days notice] would be reasonable. I am just saying this is unreasonable.”

Details on how to file a claim for the Citibank overdraft class action settlement were not immediately available. Keep checking TopClassActions.com or sign up for our free newsletter for the latest updates. You can also mark this article as a “Favorite” using your free Top Class Actions account to receive notifications when this article is updated.

The plaintiff is represented by Michael W. Sobol and Roger N. Heller of Lieff, Cabraser, Heimann & Bernstein LLP and by Richard D. McCune and Jae K. Kim of McCune & Wright LLP.

The Citibank Overdraft Fee Class Action Lawsuit is Ronald S. Arendas v. Citibank Inc., et al., Case No. 3:11-cv-06462, in the U.S. District Court for the Northern District of California.