A federal judge in California ordered Wells Fargo to pay $203 million back to customers and to change its "unfair and deceptive business practices" that led customers to pay multiple overdraft fees.
U.S. District Judge William Alsup said Wells Fargo engaged in profiteering by processing checks, debit card transactions and bill payments from the highest dollar amount to the lowest, rather than in the order the transactions took place. The policy led to lower balances in customer bank accounts, which subsequently drove up overdraft fees. The judge called the policy "gouging and profiteering."
The case noted two Wells Fargo customers who used their debit cards for multiple small purchases, and were then charged hundreds in overdraft fees because the order the purchases were cleared by the bank depended on the amounts. The judge said the customers were not properly informed of the bank's payment processing policies, and were unaware the bank would allow debit purchases to go through when their accounts were overdrawn.
The judge dismissed Wells Fargo's arguments that customers wanted and benefited from the policies.
Wells Fargo has been ordered to stop posting transactions in high-to-low order by Nov. 30 and to reverse overdraft fees charged to customers from Nov. 15, 2004, to June 30, 2008. The estimated cost to the bank is $203 million.
Introduction to Preferred Shares
Learn the difference between preferred and common shares.View Course »