A lawsuit in California concerning Wells Fargo and its procedures regarding overdraft fees finished just lately. Wells Fargo was ruled to have unfairly charged people with overdraft fees, and Judge William Alsup ordered the financial institution to repay them. The judge found their fees were derived from deliberate manipulations of overdraft protocol intent on profiting the financial institution. Overdraft fees are controversial, and some contend that people are better off getting a cash advance than using overdraft protection.
Judge orders Wells Fargo to repay $ 230 million
Wells Fargo was ordered by Federal Judge William Alsup to pay customers back for overdraft fees to the tune of $ 230 million, as outlined by Forbes. Depending on the amounts involved in an overdraft, the fees can have APR twice that of a payday loan or more. One of the practices in question is clearing the largest charges first, which can exacerbate an overdraft of only a couple of dollars, resulting in a charge of $ 35 per occurrence.
Wells Fargo banked on individuals going a bit overboard
Wells Fargo also didn’t extend the option for customers to decline a transaction that would put them into overdraft. The judge also cited documents from the bank that showed they attached lines of credit to accounts so that all charges would clear and therefore the fee would be unavoidable as a result. He also drew from Wells Fargo internal communications that cited profit as a motive for their overdraft policies. The financial institution generated $ 1.4 billion from 2005 to 2007 in California alone. The interest rate on overdraft fees could be higher than if an individual were to get a unsecured loan to float them.
Overdraft practices overhauled
There are new rules taking shape for some banking procedures, for instance for charge cards and for overdraft programs. The Federal Reserve instituted a rule that mandates banks give customers the option of enrolling in overdraft protection, according to CNN Money. Overdraft fees generate more than $ 38 billion in income for banks annually.
Discover more information on this subject
forbes.com/davidrandall/2010/08/11/how-wells-fargo-cheated-its-customers/?boxes=Homepagechannels
money.cnn.com/2010/05/21/news/economy/consumer_protection/index.htm
