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Sunday
Feb062011

Bank of America To Pay $410 Million in Overdraft Suit Settlement

Photo Courtesy - Getty Images(MIAMI) -- In a settlement unsealed Friday, Charlotte, N.C.-based Bank of America agreed to pay $410 million to complainants who allege the bank used deceptive and manipulative methods in order to extract more money from clients who over drafted their debit accounts.

The settlement, dated January 27, results from a class action lawsuit against several banks including Citigroup Inc., JPMorgan Chase & Co., and Wells Fargo & Co. Several cases from across the country were consolidated into one in 2009 and handled in Miami federal court.

Ralph Torres, the man who filed suit against Bank of America in 2000, said in court documents that the bank would re-order his transactions so that the largest amounts would be debited from his account first. Torres also said the bank would delay processing smaller transactions, making it appear as if he had more money in his account than he actually did, thus allowing him to feel comfortable to continue spending.

Lawyers for the bank responded in court documents claiming that larger transactions were processed first because they usually are higher priority payments like bills and loan payments.

According to the Center for Responsible Lending, overdraft fees cost customers $10 billion in 2004, $17.5 billion in 2006, and $23.7 billion in 2008

Bank of America said it has since revised its policies to decline debit purchases if a customer does not have sufficient funds, and has introduced new accounts that will prevent excessive overdrafts.

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