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Judge orders Wells Fargo to pay back $203M in fees

Catz Part Deux

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Judge orders Wells Fargo to pay back $203M in fees - Yahoo! Finance

NEW YORK (AP) -- A federal judge in California ordered Wells Fargo & Co. to change what he called "unfair and deceptive business practices" that led customers into paying multiple overdraft fees, and to pay $203 million back to customers.

In a decision handed down late Tuesday, U.S. District Judge William Alsup accused Wells Fargo of "profiteering" by changing its policies to process checks, debit card transactions and bill payments from the highest dollar amount to the lowest, rather than in the order the transactions took place. That helped drain customer bank accounts faster and drive up overdraft fees, a policy Alsup referred to as "gouging and profiteering."

Wells Fargo adopted the policies beginning in 2001, and they became widespread across the banking industry. It is unclear how the ruling would apply to the rest of the industry.

The ruling detailed the experiences of two Wells Fargo customers who used their debit cards for multiple small purchases, and were then charged hundreds in overdraft fees because the order the purchases were cleared by the bank depended on the amounts. The judge found the customers, who were part of a class action, were not properly informed of the bank's policies on processing payments and were unaware the bank would allow debit purchases to go through when their accounts were overdrawn.

"Internal bank memos and e-mails leave no doubt that, overdraft revenue being a big profit center, the bank's dominant, indeed sole, motive was to maximize the number of overdrafts," Alsup wrote. That policy would "squeeze as much as possible" from customers with overdrafts, in particular from the 4 percent of customers who paid what he called "a whopping 40 percent of its total overdraft and returned-item revenue."

The judge dismissed Wells Fargo's arguments that customers wanted and benefited from the policies, and detailed evidence he said showed efforts to obscure the practices in statements and other materials. Wells Fargo's online banking system, for example, would display pending purchases in chronological order, "leading customers to believe that the processing would take place in that order."

"The supposed net benefit of high-to-low resequencing is utterly speculative," he wrote. "Its bone-crushing multiplication of additional overdraft penalties, however, is categorically assured."

Alsup also criticized the bank for allowing overdraft purchases after accounts had been drained by offering a "shadow line of credit" that customers were unaware existed.

Good news. Apparently, this ruling may also affect a group class action pending in Florida, and involving banks like Bank of America.
 
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tlmorg02

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It is indeed good news, but that with a double-edge. No doubt banks do what they can to gouge customers, but with this we will surely see some new fees. If people would keep track of their accounts they would not overdraw and subsequently be charged an overdraft fee. Now the banks will pass the losses onto even the responsible customers.
 

Catz Part Deux

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This isn't just about people overdrawing their accounts. It's about the banks creating policies that add fees on top of fees so that a single overdrawn check can create hundreds of dollars in fees.

I know in the case of Bank of America, checks can already have cleared through an account, and then a larger check comes through, and the bank will reverse 10 smaller checks and cover the larger one.

In that instance, a reasonable fee might be $35, but the customer would instead end up paying $350 in fees.

I don't have any problems with the banks making a reasonable profit.

And, no. This isn't going to be passed along to people who've never bounced a check, because there is nothing to pass along. :roll:
 
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tlmorg02

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And, no. This isn't going to be passed along to people who've never bounced a check, because there is nothing to pass along. :roll:

If you think that the banking industry will not find a way to preserve the income they get from the dubious practices then you are naive. Where were you when the banking reform bill went through and everyone's credit interest rates shot-up?
 

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If you think that the banking industry will not find a way to preserve the income they get from the dubious practices then you are naive. Where were you when the banking reform bill went through and everyone's credit interest rates shot-up?

Well, see, credit rates aren't really MY problem, because I don't have a lot of debt.

See how that works?
 

tlmorg02

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Well, see, credit rates aren't really MY problem, because I don't have a lot of debt.

See how that works?

I am not defending the practices in anyway and do feel the time to end them is at hand, but they may raise credit rates or simply add fees to banking. They will find a way to recoup that income.
 

Catz Part Deux

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I am not defending the practices in anyway and do feel the time to end them is at hand, but they may raise credit rates or simply add fees to banking. They will find a way to recoup that income.

I'm sure taht they will. On the other hand, they seem to have lived without it prior to 2001. So, for what, a hundred and fifty years?
 
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