A federal judge in California ordered Wells Fargo & Co., operator of Connecticut’s Wachovia branch network, to change what he called “unfair and deceptive business practices” that led customers into paying multiple overdraft fees, and to pay $203 million back to customers, The Associated Press reports.
U.S. District Judge William Alsup accused Wells Fargo of “profiteering” by changing its policies to process checks, debit card transactions and bill payments from the highest dollar amount to the lowest, rather than in the order the transactions took place.
That helped drain customer bank accounts faster and drive up overdraft fees, a policy Alsup referred to as “gouging and profiteering.”
Wells Fargo adopted the policies beginning in 2001, and they became widespread across the banking industry.
It is unclear how the ruling would apply to the rest of the industry.
The ruling detailed the experiences of 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 found the customers, who were part of a class action, were not properly informed of the bank’s policies on processing payments and were unaware the bank would allow debit purchases to go through when their accounts were overdrawn.
Judge Alsup ordered Wells Fargo 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, as a result of the policy. A study cited in the decision by a Wells Fargo witness put the restitution at “close to $203 million.”
Wells Fargo spokeswoman Richele Messick said the bank is “disappointed” with the ruling. “We don’t believe the ruling is in line with the facts of this case and we plan to appeal,” she said.
Messick noted that Wells Fargo changed its policies earlier this year, and customers can no longer incur more than four overdraft charges in one day.
