In March 2017, Wells Fargo was forced to settle with consumers who had accounts opened without their permission for $142 million. In 2020, Wells Fargo shelled out an additional $3 billion to settle with the Justice Department and Securities and Exchange Commission. The legal fallout continues through various legal actions against Wells Fargo, including a shareholders’ derivative action.
An open and shut (shut, open and shut again?) case, perhaps
Shameless puns aside, the details of TD Bank’s conduct have a pretty bad odor. Ms. Jimenez opened a checking account with Mercantile Bank in 2005. In 2010, TD Bank acquired Mercantile; on April 15, 2020, TD Bank closed her account and sent her a check for the balance, which was $342.65.
There is no question but that TD Bank was entitled to do this under the terms of the Personal Deposit Account Agreement. Particularly after an acquisition, this is a perfectly normal thing for banks to do for perfectly normal business reasons, including geographic considerations or a decision to focus on other kinds of accounts.
There was no indication that the closure was because of bounced checks. Ms. Jimenez’s account was not overdrawn. In fact, during the months preceding TD Bank closing the account, she had incurred only one overdraft fee. TD Bank never gave her any reason for closing her account.
On April 17, 2020, the bank re-opened her checking account, without any authorization from Ms. Jimenez and without her knowledge. Nothing in her Account Agreement permits the bank to spontaneously open an account in a customer’s name or re-open a closed one.
TD Bank then:
- reversed a provisional credit to the account of $12.31;
- assessed Ms. Jimenez an overdraft paid fee of $35.00 for the provisional credit reversal;
- returned a $35.00 check that Ms. Jimenez had written before the bank closed the account and cashed her out;
- assessed an overdraft fee of $35.00 on the check it returned; and
- charged her a monthly maintenance fee of $4.99.
On April 28, TD Bank closed the account again, and sent Ms. Jimenez another check for what was left of her tax return. Ms. Jimenez sent a letter to TD Bank asking for an explanation, but the bank refused to respond.
She sued. In addition to the facts of her own situation, the lawsuit alleges that she is likely only one of many customers affected by TD Bank’s pursuit of profits at the expense of customers with small checking or savings accounts. A class action lawsuit is generally the most financially available way for those whose individual financial losses are small to seek legal redress.
New Jersey based legal claims
As with many recent excessive bank overdraft fee lawsuits, the Jimenez Complaint rests entirely on the provisions of state law. The lawsuit claims that TD Bank’s actions broke New Jersey law in three ways.
The first count cites New Jersey’s common law against breach of contract and the covenant of good faith and fair dealing. The contract claims are rooted in the language of the Account Agreement, which explicitly excludes from the definition of “Account,” accounts not opened by the customer. By extension, that would also cover an account re-opened by the bank without the authorization or knowledge of a customer.
An implied covenant of good faith and fair dealing governs every contract in New Jersey. The first count also claims that TD Bank breached that promise by using the discretion it afforded itself under the Account Agreement to open an account in Ms. Jimenez’s name, accept deposits into the account without her permission, and then seize funds from the account.
As an alternative to the contract claim, the second count alleges that TD Bank unjustly enriched itself through its wrongful acts. The third count, of common law conversion, claims that TD Bank assumed and exercised the right of ownership over the funds in customers’ accounts without proper authorization and without legal justification. On a very basic level, the tort of “conversion” is often thought of as the civil law equivalent of the criminal law’s concept of “theft.”
READ MORE EXCESSIVE OVERDRAFT FEE LEGAL NEWS
An echo of Wells Fargo scam?
Perhaps the most startling thing about Jimenez, however, is how closely it seems to resemble the Wells Fargo fake account scandal. Without re-hashing the details, suffice it to say that it ended very badly for Wells Fargo. After more than four years, it is not entirely clear that it is completely over.
Will TD Bank ultimately face the same consequences? A great deal depends of whether, at trial, Jimenez is able to muster evidence of a widespread scam. If the lawsuit does not settle before then, that is certainly a spot to watch.