Wells Fargo was charged in a California Federal Court over its practices involving overdraft fees. The presiding judge, William Alsup, handed a ruling which ordered Wells Fargo to pay back a considerable sum to Californians that it had unfairly dinged for overdrafts. The judge found the financial institution had deliberately manipulated overdraft methods to profit heavily, and did not mince words in his selection to penalize the bank for its actions. There has been lots of controversy about overdraft protection, and some contend that an individual is better off with a cash advance.
Judge orders Wells Fargo to repay $ 230 million
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. The judge also highlighted that Wells Fargo had a practice of clearing the largest charges first, which guaranteed that customers would lapse into overdraft and be charged $ 35, even if customers on overdrew their accounts by a few dollars.
Wells Fargo took fees from their banks to the bank
Wells Fargo did not make the option to decline transactions or overdraft protection enrollment clear to customers. 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. The judge also cited that internal communications from Wells Fargo proved the motive was explicitly to profit from overdraft fees. Between 2005 and 2007, Californians paid Wells Fargo $ 1.4 billion in overdrafts fees. An individual can almost be better off if they get a quick personal loan rather than allowing an overdraft to happen.
An overhaul for overdrafts
There are new rules in place concerning overdraft practices, and other credit from banks such as credit cards. The Federal Reserve, according to CNN Cash, has instituted a rule that mandates banks notify consumers of the option to not take overdraft protection. Banks make about $ 38 billion each year from overdraft fee income.
Find 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
