Most recently, Wells Fargo was sued in a California Federal Court for practices related to their overdraft fees. 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 held the financial institution had intentionally structured their overdraft policies to extricate profit from their customers. Numerous contend that is better off getting a cash advance than relying on overdraft protection.
Judge orders $ 230 million to be paid back to customers
Judge William Alsup, according to Forbes, ordered Wells Fargo to pay customers $ 230 million in what he deemed unfair overdraft fees. Depending on the amounts involved in an overdraft, the fees can have APR twice that of a cash advance or more. Wells Fargo’s practice of clearing the largest charges first, as outlined by the judge, made it more likely that an overdraft would occur, which results in a charge of $ 35 per occurrence.
Wells Fargo took a lot to the bank
Wells Fargo also didn’t extend the option for customers to decline a transaction that would put them into overdraft. The judge also highlighted documents showing that the bank put covert lines of credit in place for checking accounts, making it impossible for transactions to not clear and thus guaranteeing that an overdraft fee would result. The judge also cited that internal communications from Wells Fargo proved the motive was explicitly to profit from overdraft fees. Wells Fargo got $ 1.4 billion from Californians in overdraft fees between 2005 and 2007. The rate of interest on overdraft fees can be higher than if a person were to get a unsecured loan to float them.
Overdraft practices overhauled
You will find new rules taking shape for some banking procedures, for instance for charge cards and for overdraft programs. According to CNN Money, the Federal Reserve enacted a rule that makes it mandatory for banks to give people the option to decline overdraft protection. Overdraft fees generate more than $ 38 billion in income for banks annually.
More on this topic accessible at these sites
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
