Iberiabank Corp. agreed to pay $2.5 million to settle consumer lawsuits accusing the Louisiana bank of illegally charging excessive overdraft fees, according to court papers.
Iberiabank officials also will change policies governing the way debit-card transactions are handled in connection with overdraft fees, the Lafayette, Louisiana-based bank said in an Oct. 18 court filing in federal court in Miami. Overdraft suits filed across the U.S. have been consolidated in that court for pre-trial proceedings.
Bank customers who are covered by the settlement will receive their share of the settlement fund “without having to do anything at all,” lawyers for consumers who sued Iberiabank over the overdraft policy, said in the court filing.
The settlement comes nine months after Bank of America Corp., the second-largest U.S. bank by assets, agreed to pay $410 million to resolve similar claims over its overdraft policies. In May, a judge in Miami gave preliminary approval to the accord.
Daryl Byrd, Iberiabank’s president and chief executive officer, didn’t immediately return a call seeking comment on the settlement today. The bank didn’t admit any wrongdoing in the settlement, according to the court filing.
The settlement, which was initially reached in mediation talks in May, represents 0.0227 percent of Iberiabank’s approximately $11 billion in assets, according to the filing. Bank officials said in July net income fell 41 percent to $5.1 million in the second quarter. They noted that $2.8 million reserved for the settlement added to the quarter’s costs.
Suits against about 15 banks have been consolidated before U.S. District Judge James Lawrence King in Miami as part of a so-called multidistrict litigation. King has been overseeing pre-trial exchanges of information in the cases since June 2009.
Consumers contend that banks, including Bank of America, JPMorgan Chase & Co., Wells Fargo & Co. and Iberiabank had policies that allowed them to debit account holders’ funds in a way that made it more likely they’d incur overdraft fees.
Last year, the Federal Reserve imposed rules prohibiting lenders from automatically charging fees when consumers have insufficient funds for electronic or debit transactions.
Iberiabank customers alleged in the suits the bank wrongfully engineered the way it posted debit-card transactions to maximize the possibility that account holders would incur overdraft fees.
Iberiabank officials have agreed to change “its transaction posting practices” to cut down the chances customers will be hit with the fees, lawyers said in the court filing.
The case is In re Checking Account Overdraft Litigation, 09-02036, U.S. District Court, Southern District of Florida (Miami).