Bank of America agreed to settle a lawsuit alleging the bank used unethical practices, including "reordering" of transactions to increase profits. Customers who had a Bank of America account with a debit card between January 2001 and May 2011 could be eligible to receive money from the settlement, which will see customers share proceeds from a $410-million fund.
According to The Associated Press (08/06/11), Bank of America was accused of reordering transactions, a practice that involved deducting debits from an account starting with the largest transaction first. That practice put customers at risk of paying more overdraft transaction fees than they should have, if their accounts had been debited in the order the transactions occurred.
Lawsuits against banks that used reordering alleged that the practice was done for the purpose of generating fees. According to some reports, banks averaged $39 billion in overdraft fees a year until the Federal Reserve changed laws overseeing overdraft policies.
The New York Times (05/23/11) reports that there are as many as 30 other banks who have not yet settled similar lawsuits, including Citibank and JPMorgan Chase. The Federal Reserve has also ordered banks to obtain customers' permission before enrolling them in overdraft protection.
In August 2010, Wells Fargo was ordered to pay $203 million to customers, after a judge ruled the bank's practices were unfair and deceptive. In his ruling, the judge ruled that Wells Fargo not only reordered transactions, but also misled customers into thinking purchases would be charged in the order made, rather than being reordered.
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"When the group of charges is eventually posted to the customer's account, Union Bank posts them in order of largest to smallest… This delayed posting results in the imposition of multiple overdraft fees that would not otherwise be imposed. The delayed posting also prevents customers from ascertaining accurate balances in their accounts," the lawsuit alleges.