Overdraft Fees and Bank of America

A class action lawsuit was filed against Bank of America (BoA herein) in the state of California. The case is Closson v. Bank of America and was held in the Superior Court of the State of California in the County of San Francisco.  Our understanding was Closson filed a class action lawsuit based upon unethical business practices by BoA and their associated banks. BoA and their associated banks are going to pay out an estimated $35 million in settlement fees for the accusations of their unethical business practices.

The reader may be asking what BoA did in order to pay $35 million dollars back to their customers. In the midst of this recession BoA and associates were looking for various avenues to increase their annual revenues. BoA succumbed to the pressure of having to show increased earnings by taking advantage of their customers. They designed their overdraft fees associated with an individuals’ account to work in their benefit instead of their customers.

Example: Johnny always pays his bills at the end of the month.  He is paid monthly by electronic transfer at the first of each month.  Johnny assumed he had enough funds to cover his bills at the end of the month and forgot he had only $1,000.00 in the bank due to spending extra money on his vacation last month. Johnny’s bills were as follows: $1,003 mortgage, $200 HOA, $350 cable bill, and $450 water/electric bill. The total for Johnny’s expenses for the month were $2,003. Due to Johnny not checking his bank account he did not realize he was short on available cash.  He paid all four bills at once via check on the same day.

In our example Johnny should have been assessed one fee for insufficient funds, returned check, bounced check, etc. Instead the bank assessed Johnny’s account with four cases of overdraft fees. When BoA released funds to pay for his various bills they paid them in order from greatest-to-least. Therefore, his payments were withdrawn in the following order: $1003, $450, $350, $200.  Thus, BoA caused his account to be overdrawn. However, if the bank ordered his withdrawals from least-to-greatest he would of only had one incident of overdrawn funds instead of four.

BoA took advantage of many of their customers by instituting these business tactics. Therefore, the BoA and associates are paying out $35 million in lieu of settlement for these accusations brought forth in Closson v. Bank of America.

Many customers may be eligible to receive $75.00 dollars or more. From our understanding all submissions had to be done by May 1, 2009. However, the nation reported on this matter in late September 2009 and we just read about it locally in October 2009. We are performing more research on why we are just hearing about it now and why the mass media reported on it five months after the due date of the submissions. Please see a local news channel in North Carolina report on the issue.

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