B of A Pays $410 Million to Settle Overdraft Suit

FEBRUARY 4, 2011, 11:37 P.M. ET.

Bank of America Pays $410 Million to Settle Overdraft Suit

By DAVID BENOIT

NEW YORK -- Bank of America Corp. agreed to pay $410 million to settle a Florida lawsuit filed against the bank by checking-account customers who alleged they had been charged excessive overdraft fees.

The Charlotte-based bank was only one of several national banks named as defendants in the suit in Miami federal court. Some 15 different complaints were consolidated in the lawsuit in June 2009.

The bank said in a court filing Friday that it had reached an understanding with the plaintiffs to free itself from the suit by paying the $410 million. The filing didn't elaborate.

A Bank of America spokesman wasn't immediately available for comment.

The plaintiffs were seeking to recover "alleged excessive overdraft fees for charges made" to their accounts on debit-card transactions.

Also named in the consolidated lawsuit were Citigroup Inc., J.P. Morgan Chase & Co., Wells Fargo & Co., U.S. Bancorp, SunTrust Banks Inc. and Huntington Bancshares Inc.

Since the suit was consolidated in late 2009, new federal regulations have forced the banks to change overdraft tactics, and Bank of America had been among the most vocal in doing away altogether with overdraft fees. The fees are usually heavy charges made when customers spend more than is in their account at the time. The situation was often described as a $38 cup of coffee; that is, a consumer who mistimed the purchase of a $3 cup of coffee would find himself with a $35 overdraft fee tacked on.

The new regulations say that banks cannot charge overdraft fees without first getting customers' approval. Some banks have pushed aggressively to get their customers to "opt-in" to overdraft fees, as some customers view the fees as a convenience.

But Bank of America decided it wouldn't allow any customers to opt-in, and did away with any ability to overdraft. Chief Executive Brian Moynihan had even said the practice wasn't in the bank's or its customers' interest.

"When you looked at it in hindsight, it's not the right way to treat them," Mr. Moynihan said on a conference call. "I don't think them opting in is going to change that dynamic, and I think they'll be upset once they opt in down the road."

Write to David Benoit at david.benoit@dowjones.com

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