Overdrafts

Wells Fargo & Co. have been ordered by a federal judge in California to change what he deemed “unfair and deceptive business practices” that cause customers to pay multiple overdraft fees. The order also stated that Wells Fargo & Co. must pay back $203 million to the customers it charged.
U.S. District Judge William Alsup ultimately delivered the decision on Tuesday, accusing Wells Fargo of making profit by altering its policies regarding check processing, card transactions, and bill payments from the highest dollar amount to the lowest, instead of the logically opposite direction of lowest to highest. Customer bank accounts were drained and overdraft fees began to pile up, a completely illegal practice, deemed Alsup.
In 2001, when Wells Fargo adopted these new policies, many other banks took notice and changed their policies as well. Currently, it’s unclear as to whether or not the ruling by Alsup will affect the rest of the banking industry.
The ruling took into account the experiences of two Wells Fargo customers who made small purchases on their debit cards and were then charged exorbitant overdraft fees because of the order the purchases were accepted and cleared by the bank. The customers, part of a class action lawsuit, were not properly informed of the policies adopted by Wells Fargo and had no knowledge that the bank would continue to allow purchases to go through even when their accounts were already overdrawn.
The judge demanded that Wells Fargo stop its practice of posting transactions from high-to-low order by November 30th, as well as reverse overdraft fees charged to customers from November 15th, 2004 to June 30th, 2008.
Richele Messick, a spokeswoman for Wells Fargo expressed the banks obvious disappointment with the ruling. She says, “We don’t believe the ruling is in line with the facts of this case and we plan to appeal.”
Wednesday showed Wells Fargo’s shares down $1.47, or 5.3 percent. Broader markets dipped sharply due to economic concerns, banks being hit hardest.

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Posted by Brett Nordin on Dec 11 2010. Filed under Featured News, Finance. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.