According to Reuters (11/02/17) plaintiffs asserted that some of the banking overdraft fees charged by Bank of America were not connected to any real service in exchange for the fees, and thus translated to an interest charge that violated the National Bank Act.
The bank overdraft fees lawsuit was filed in 2016. Lead plaintiff Joanne Farrell from California, alleged in the excessive overdraft fees class action that the defendant charged $35 when an account is first overdrawn, then another $35 if the account remains in overdrawn status for five days. Farrell’s lawsuit noted that the initial fee was charged for honoring a check when the account holder had insufficient funds in the account. However, the second fee was not tied to any particular service and – as such – the fee was in reality an interest charge for continued use of the bank’s funds.
In Farrell’s case, her negative balance ranged from $3.59 to $284.86 across the five days represented by the second $35 overdraft fee.
Viewed as annualized interest, the fee would translate to an interest rate ranging from 897 percent to 71,170 percent, according to the excessive bank fees lawsuit.
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According to Reuters, there are upwards of six million customers of the Bank of America who will benefit from compensation derived from the settlement. Those customers, who hail from across the nation, paid overdraft fees reaching back to February of 2014. As part of the settlement, the defendant also agreed to stop charging for extended account overdrafts for a period of five years. The hiatus in fees is estimated to save plaintiffs about $1.2 billion over the five-year term.
The excessive bank overdraft fees lawsuit is Farrell et al v. Bank of America, Case No. 16-492, in the US District Court, Southern District of California. The settlement was disclosed in a court filing on October 31.