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Wells Fargo ordered to pay back $203 million in unfair overdraft fees
by Joseph Ernest August 11, 2010
Newscast Media -- U.S. District Judge William Alsup has ordered Wells Fargo & Co. to stop manipulating debit-card transactions without consumers' knowledge to increase revenue from overdraft fees, ruling while the bank should pay about $203 million to customers because of the practice.
Judge William Alsup in San Francisco sided with three customers who sued in 2007 on behalf of thousands of Californians charged overdraft fees. In a ruling yesterday, he agreed that the practice was unfair, deceptive and fraudulent.
In 2001, Wells Fargo, the largest U.S. home lender, changed the way it treated daily debit transactions and cash withdrawals so that transactions with the highest dollar amount posted first, rather than in the order they occurred, according to the complaint. The practice, allegedly intended to boost revenue from overdraft fees, led to customers overdrawing accounts by small amounts multiple times a day, according to the complaint. Story continues below...
Customers don’t "reasonably expect that they will have to pay up to 10 overdraft fees when only one would ordinarily be incurred," Alsup wrote, deciding the case without a jury. The multiple fees are “so pernicious," he said, that they should be allowed only if customers expected them and in this case “the proof is the opposite."
Wells Fargo will appeal the ruling, which isn’t "in line with the facts of the case," Richele Messick, a spokeswoman for the San Francisco-based bank, said yesterday in a phone interview.
Wells Fargo’s method of processing transactions has been "appropriate and consistent with customers’ interests and the laws and rules of governing regulatory authorities," Messick said.
"Many banks process customers’ transactions in high-to-low order,” she said, "because it gives priority to larger transactions," such as mortgage, rent or car payments. The case is Gutierrez v. Wells Fargo, 07-05923, U.S. District Court, Northern District of California (San Francisco). Add Comments>>
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