Bank of America ordered to pay $284 million

December 31, 2004|By BLOOMBERG NEWS

SAN FRANCISCO - Bank of America Corp., the third-largest U.S. bank, must pay $284 million to customers who were charged overdraft fees on accounts containing customer Social Security deposits, a California judge ruled yesterday.

The decision also orders the bank to give each affected customer $1,000. Up to 1.3 million customers may qualify, which could eventually increase the award to $1.6 billion, plaintiffs' lawyer Mark Johnson said.

Bank of America said it intends to appeal the decision, in which Judge Anne Bouliane confirmed a tentative Dec. 8 ruling.

The bank argued that it couldn't stop charging the overdraft fees because the accounts at issue contain both Social Security and other funds. The order is "asking the bank to change its systems, to change its programs [so] the fees won't be charged, but there's no way to tell what debits are allowed and which aren't allowed," Arne Wagner, a Bank of America lawyer, contended.

Bank of America collects between $3 million and $4 million each month in bounced-check fees from the accounts of California customers who have their monthly Social Security benefits electronically deposited, Johnson said.

Neither Wagner nor the bank could be reached for comment yesterday.

The bank notifies customers in writing that such fees can be automatically deducted from accounts. Bouliane ruled they weren't told the fees could be applied to Social Security money.

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