$410 Million Settlement for 13 Million Bank of America Customers Over Debit Card Overdraft Fee Manipulation

For roughly a decade, Bank of America customers using debit cards were hit with overdraft fees they may not have expected. A class action lawsuit filed in the Southern District of Florida alleged the bank was not simply charging fees when accounts ran short; it was engineering the conditions that produced them.

The complaint accused Bank of America of reordering debit card transactions from highest to lowest dollar amount before posting them each day, a practice that could wipe out an account balance in one stroke and then generate multiple $35 overdraft fees on smaller purchases that would otherwise have cleared. Plaintiffs also alleged the bank delayed posting certain charges for days after the purchase was made, further depleting balances before batches of pending transactions hit.

Aaron Podhurst of Podhurst Orseck, one of three firms serving as lead counsel for the class, argued that this reordering scheme was deceptive and cost ordinary customers far more than they should have owed. The bank denied any wrongdoing throughout the litigation.

Senior U.S. District Judge James Lawrence King gave final approval to the settlement on November 7, 2011. The $410 million fund covered approximately 13.2 million Bank of America debit card account holders who incurred overdraft fees between January 2001 and May 2011. Eligible class members received compensation amounting to at least nine cents on the dollar for qualified overdraft fees paid, with some calculations putting total payouts at 45 cents on the dollar depending on individual circumstances.

Podhurst described the result as one of the largest consumer class action settlements ever reached in the United States at the time of approval. The three lead firms, Podhurst Orseck, Grossman Roth of Coral Gables, and Lieff Cabraser Heimann and Bernstein of San Francisco, each received fees reported at more than $20 million from the settlement fund.