Bank of America is in the news, again. Earlier in the month there was a settlement posted for $35 million. This had to do with the method Bank of America used to obtain fees.
The court release form from the Bank of America Settlement website reported earlier in the month that there was a good chance, despite its protest, that Bank of America had considered a payout of about $78 per customer.
A chart was provided for people to determine if they felt they were eligible. I have linked to that page for the reader to check out should they so desire.
There was an understanding that there would be a period of time when the decision could be researched before being implemented.
As the article posted online by CBSnews.com out of San Francisco reports, the major issue involved has to do with overdraft fees with respect to years 2006-2007. The story, “Bank of America Customers May Be in For a Refund,” asserts that the average household must pay about $368 in overdraft fees every year. While the lawsuit will not make bank customers “financially whole,” it will give them some menial recapture; it is a moral victory.
The reason Bank of America is apparently liable at all is the way they process checks and penalty fees.
Let us say that your bank charges $25 for a returned check. You have $200 dollars in your account. Due to an accounting error you have written three checks for $50 and one for $160. Instead of “clearing” the three checks so there is just one fee of $25 the bank will pay the big check first sending three back and charging the account $75.
This method is used by most banks and is called the “largest to smallest method.”
However, some banks make it even worse. They take the posture that they will remove their fees before paying any financial instrument. In our illustrated case the bank would hit the account for $75 before paying anything which would result in no check being paid. You would end up with all four checks being returned and your account debited for $100.
In a related story, Associated Press says that during the request for bailout money banks have lain off 100,000 employees during the years 2006-2007 yet during the same period only 1 executive out of ten has lost his job. There is something wrong with this picture.
As most people, I get irritated with my bank from time to time. However I will mention one thing I think speaks well of them and that is they cover checks up to a $500 overdraft which can come in very handy.
I think it’s incredible these days how executives who have caused this major financial problem don’t feel guilty enough to quit.