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Highway Robbery

Wells Fargo is the first of several banks to face the wrath of consumers in class action lawsuits resultant of their abuses of fees related to consumer checking accounts. In an influential California case Wells Fargo has been ordered to pay $203 Million in restitution. Other major banks are on the chopping block in a national case. The shady practice of artificially arraigning the sequence of debits to an account to maximize the number and amount of penalties brutalizes consumers on fixed incomes, and consumers already at risk, adding hundreds of dollars a month in penalties to a downward spiral. This really should be treated as a criminal enterprise.

Old Time Highway Robbery, same as the New Highway Robbery... Except It's Now Done By the Bank

Wells Fargo faces larger suit on overdraft fees

San Francisco judge’s scathing ruling ordering Wells Fargo to pay its customers $203 million for manipulating debit transactions to maximize overdraft fees might be just the start of troubles for the bank.

U.S. District Judge William Alsup’s 90-page opinion Tuesday described Wells Fargo’s motive as profiteering and said the San Francisco-based bank’s goal was to “maximize the number of overdrafts and squeeze as much as possible” out of customers.

But the hefty tab represents only what Wells owes its California customers. That figure is far smaller than the potential bill from a separate suit in which Wells’ clients in other states have accused the bank of the same unfair practices.

That case, consolidated in federal court in Miami, includes similar claims against 30 other lending institutions, including Bank of America, Citibank, Chase, Union Bank and U.S. Bank.

The crux of the claims is that the banks processed debit transactions from the largest to the smallest, instead of the order in which they occurred, depleting accounts faster and boosting the number of overdrafts, which cost as much as $35 per transaction.

Wells Fargo garnered more than $1.4 billion in overdraft fees just in California from 2005 to 2007, according to court documents. Nationwide, banks and credit unions collected almost $24 billion in overdraft fees in 2008, according to the Center for Responsible Lending.

Wells Fargo, which continues to follow the “high-low” practice that it has had in place since 1998, said it would appeal Alsup’s decision. Wells representatives declined to forecast what the ruling might mean in the Florida matter, other than to say that the California order was not in line with the facts and that the bank’s transactions have been “consistent with the laws and rules of governing regulatory authorities.”

“We have found that high-low gives priority to larger payments and have found that those are the customers’ priority payments … it gives priority to larger transactions,” said Richele Messick, spokeswoman for Wells Fargo.

Messick said that many transactions are received by the bank in a random order without a time stamp, and therefore, the bank needed to determine an order in which to process them.

 
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Posted by on August 12, 2010 in American Greed

 

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