The New York Times reports this week that a federal judge ordered Wells Fargo to pay California customers $203 million in restitution for claims that it had manipulated transactions to maximize the overdraft fees it charged.
Instead of processing transactions in the order in which they were received, Wells Fargo put through the largest to smallest, a judge in San Francisco found. In a stinging 90-page opinion, United States District Judge William Alsup wrote that the practice was unfair and deceptive.
“The bank’s dominant, indeed sole, motive was to maximize the number of overdrafts and squeeze as much as possible” out of customers who spent more than they had in their accounts, the judge wrote. The ruling comes after a two-week trial in the spring heard by the judge. Wells Fargo, which collected nearly $1.8 billion in overdraft fees in California alone from 2005 to 2007, said it would appeal.
The judge’s ruling could portend problems for other banks that are defendants in similar cases. Other federal lawsuits regarding overdraft fees have been consolidated into one class-action suit in Florida, which also claim that Wells Fargo and other banks manipulated transactions to maximize overdraft fees.
Ruben Honik, one of the lawyers representing plaintiffs in the Florida case, said the judge’s ruling would provide a “road map. It was a litmus test for our theory and the whole approach we took.”. Overdraft fees have become an important source of revenue for banks and credit unions in the last decade, particularly as debit cards have risen in popularity.