Wells Fargo was sued in a California Federal Court over its practices concerning overdraft fees. The presiding judge, William Alsup, slapped Wells Fargo with having to pay back hundreds of millions of dollars to customers it had unfairly charged. The judge found Wells Fargo’s fees were derived from deliberate manipulations of overdraft protocol intent on profiting the bank.
Wells Fargo ordered to pay $230 million
Judge William Alsup, according to Forbes, ordered Wells Fargo to pay customers $230 million in what he deemed unfair overdraft fees. Depending on the amounts involved in an overdraft, the fees can have astronomical APRs. One of the practices in question is clearing the largest charges first, which can exacerbate an overdraft of only a few dollars, resulting in a charge of $35 per occurrence.
You can bank on paying a lot
Wells Fargo did not make the option to decline transactions or overdraft protection enrollment obvious to customers. The judge also highlighted documents showing that the bank put covert lines of credit in place for checking accounts, making it impossible for transactions to not clear and thus guaranteeing that an overdraft fee would result. He also drew from Wells Fargo internal communications that cited profit as a motive for the overdraft policies. Between 2005 and 2007, Californians paid Wells Fargo $1.4 billion in overdrafts fees.
New rules for banking practices, especially concerning overdraft practices and credit cards, are being put in place. According to CNN Money, the Federal Reserve enacted a rule that makes it mandatory for banks to give people the option to decline overdraft protection. In that case, when customers try to make purchases with their debit cards, it will simply reject the card instead of allowing a negative account balance. Banks make about $38 billion every year from overdraft fee income.
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