”We think it is about time banks changed their policies but it is too little, too late. They still owe people millions,” Robert Gilbert said.

A class action lawsuit in a federal court in Miami against a growing number of banks that could lead to billions refunded to consumers picked up strength in March after a federal judge turned down a request from the banks to dismiss the charges.

Robert Gilbert, an attorney with the Miami-based law office Boldt Brown Rash & Culmo PA, which filed the lawsuit on behalf of the plaintiffs, said that federal judge Lawrence King’s refusal to dismiss the charges in March could result in consumers receiving refunds within a “12 to 24-month period.”

“It is difficult to estimate how much each person will get,” Gilbert said. The number of people that have been affected by overdrafts involves millions, he added.

Robert Gilbert, from Bolt Brown Rash & Culmo PA.

The opening of the federal case was a result of the consolidation of the many lawsuits nationwide and came after an administrative court in Washington D.C. decided in mid 2009 that all the cases should be filed as a single lawsuit in Miami, Gilbert added.

On March 11 judge King said in a 50-page report that the lawsuit against banks could go on.  He said there were enough reasons to justify a close look at the charges and that they couldn’t just be dismissed as the banks argued.

Initially the banks accused in the federal lawsuit were just Bank of America, Citibank, Chase, Wells Fargo, Wachovia and the U.S. Bank, Gilbert said.

But since judge King approved the lawsuit, other banks have been added including BankAtlantic, Regions, Branch Banking and Trust, M&T Bank, PNC Bank, TD Bank, he said.

Lawyers working in the case have invited all the people that want to contribute to the lawsuit to share their experiences through the Internet page www.bank-overdraft.com. Any consumer who was charged overdraft fees by any accused bank would receive them unless they request to be left out, Gilbert said.

According to judge King, the plaintiffs are seeking to recover for themselves and for others in the same situation “excessive” amounts that were charged in debit card transactions.

Banks to fight charges

Donald Vecchiarello, spokesman at Bank of America, said to Money Market USA that his bank cannot comment on any “pending litigation”.

Kathy Harrison, spokeswoman at Wachovia which is a Wells Fargo Company, said: “We disagree with the plaintiff’s allegations.  We believe the way we process transactions is appropriate and we will vigorously defend this case.”
Other banks contacted, including BankAtlantic, did not immediately comment.

Bank of America as well as Chase and Wells Fargo have taken action recently to reduce overdraft charges.
“Plaintiffs have alleged sufficient facts that, among other things, defendants manipulated the posting order of debit transactions in bad faith so as to maximize the number of overdraft fees incurred,” the judge wrote in his report.

The lawsuit claims that until a few years ago banks would simply keep their customers from making debit card withdrawals or not allow them to pay merchants with debit cards if they didn’t have enough funds. However, often without the awareness of consumers, banks suddenly started to honor some overdraft transactions just to later impose fees that are on average about $35 each. Often there were several fees charged.

The report claims that plaintiffs often believed they had positive balances even though the bank should have informed them that this was not the case and many people, as a result, had overdrafts.

The charging of the most expensive fees first also maximizes the possibility of several overdrafts being charged. Plaintiffs claim the ordering should have been chronological.

The judge turned down the claim by banks that this controversial ordering was already allowed in the processing of checks. The judge explained that in the case of checks it is different because higher risks are involved since a merchant can retain checks for a relatively long period of time. Yet in cases of debit charges the processing is immediate.

According to estimates by the Illinois-based business consultant company Moebs Services, in 2009 a total of $38.5 billion was charged by banks to consumers just for overdraft fees.

Even though the revenue for banks from overdraft fees will soon decline as a result of announced changes in policies by at least three banks, Gilbert said the lawsuit will go on until banks refund all that they wrongly charged.

Renzo Pipoli. Miami