Class Action Lawsuits Filed Against Bank of America (NYSE:BAC), Wachovia (NYSE:WFC), U.S. Bank (NYSE:USB), JPMorgan Chase (NYSE:JPM) and Citibank (NYSE:C) Over Overdraft Fee Policiesby Gary , October 21st, 2009
It was inevitable in the current economic climate and banking bailouts that consumers would vent their anger toward the banks on anything that frustrates over doing business with them, and that’s the case with a series of class action lawsuits filed against Bank of America (NYSE:BAC), Wachovia (NYSE:WFC), U.S. Bank (NYSE:USB), JPMorgan Chase (NYSE:JPM) and Citibank (NYSE:C) over overdraft fee policies.
These lawsuits have been consolidated in the United States District Court for the Southern District of Florida in Miami, and will be heard by Judge James Lawrence King.
Although I don’t have any sympathy for those who want free loans from their banks, which an overdraft fee addresses, I do think it’s a bad practice and unwise for the banks to continue to assess these fees in the midst of the extraordinarily difficult economic time we live. That’s just begging for a bunch of lawsuits, which they now have on their hands.
In some press releases, the most recent announcing the consolidation of the class action lawsuits, they use inflammatory rhetoric to make the banks out to be these evil, bad guys. But the problem with that is the majority of consumers don’t overdraft their checking accounts, and so why should others be treated differently when they do, when they’re being irresponsible.
For example, in this press release from lawyers, they’re attempting to demonize the overdraft practice by using examples of consumers who do it several times and then being hit with $35 overdraft fees for each transaction over a very short period of time. Why should that be something to sympathize with when it’s not only poor management, but irresponsible behavior, as they know they’re doing it, and the idea that they’re clueless as to being assessed fees is dubious at best, and in many cases outright dishonest. It’s like getting ticketed in a no parking zone or allowing the meter to run out. They know it, they’re just hoping they can get away with it.
On the banks’ side of it, they should be sure to communicate to their customers about overdraft fees and the inclusion of an overdraft part of their checking account, which keeps them from embarrassing situatons where their bank cards are declined in public places after making some type of buying decision.
In the end though, the only ones that may win in this will be the lawyers (assuming there is a victory), as those with overdraft fees won’t be compensated for much in a class action award or settlement. And if they do have high fees, what does that say about the continual use of their account without having any money in it, while the rest of us manage our finances successfully?
I’m leery of this because many people know they can make accusations against the banks which will be sympathized with during the existing economic difficulties. In normal economic times consumers would wonder about these people who think they can borrow money for free without compensating the banks, which is what an overdraft essentially is: a loan.
Of course the problem with the banks is they’re struggling to generate profits, and these fees have been a large part of generating income over the years.
But with the acceptance of government bailout money, they should have known that this would happen, and made at minimum temporary efforts to cut back on overdraft fees until the economy turned around and people began to forget how they were soaked to save the banks.
My conclusion in this is both sides are at fault, and while I can’t see the merit of these class action lawsuits, I understand the frustration behind them, whether it’s a faux frustration or not.
Either way, the lawyers know they have a great chance at a big pay day, and their aggressive press releases show they are pushing hard to sway public opinion to the negative side in order to get a strong settlement with the banks to keep more negative public sentiment from growing toward them.