Bank of America Corp. (BAC), the largest debit card issuer, won court approval of a $410 million settlement with customers who accused the bank of charging excessive overdraft fees for electronic transactions.
U.S. District Judge James Lawrence King in Miami yesterday approved the accord between the bank and about 1 million account holders, who may receive as much as 45 cents on the dollar on their claims, their lawyers said. That still amounts to a fraction of the overdraft fees they paid, the lawyers added.
“This a marvelous result for the members of the class,” King said at a hearing.
The accord was the first announced and approved of a number of settlements of claims that banks such as Charlotte, North Carolina-based Bank of America processed account transactions in a way to make it more likely to incur overdraft fees. Union Bank NA, based in San Francisco, agreed last week to pay $35 million to settle the same claims with its customers.
“We’re pleased to have reached a fair resolution in this matter,” Anne Pace, a spokeswoman for Bank of America, said yesterday in a phone interview.
At issue in the case was the automatic charging of overdraft fees for debit card transactions to about 13.2 million customers. Consumers alleged Bank of America and other banks, including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC), adopted policies designed to force customers to pay illegal overdraft fees.
The Federal Reserve last year established rules barring lenders from automatically charging fees when consumers have insufficient funds for electronic or debit transactions.
Bank of America didn’t admit any liability in the settlement.
The bank has changed its transaction processing policies since the cases were filed in 2009. Consumers are no longer charged overdraft fees on debit transactions, and they pay smaller penalties than previously for overdrawing their checking accounts.
Along with the settlement, King approved $123 million in legal fees for customers’ lawyers. That amounts to 30 percent of the accord, which drew objections from some Bank of America customers.
“Because of the large amount involved, we should not blindly apply the 30 percent rule” for legal fees generated by a settlement, Elliot Kula, a lawyer for six objectors, told the judge.
King said Bank of America customers may not have “ever seen a penny” of recovered overdraft fees without the “massive effort” of their lawyers.
“I find it fair and reasonable” that customers’ lawyers would request a fee amounting to 30 percent of the recovery, the judge said.
The case is In Re Checking Account Overdraft Litigation, 1:09-md-02036, U.S. District Court, Southern District of Florida (Miami).
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