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Ninth Circuit Addresses Wells Fargo Overdrafts

Samuels Yoelin Kantor LLP

(December 26) The U.S. Court of Appeals for the Ninth Circuit has vacated a $203M ruling against Wells Fargo Bank related to overdraft fees.

California consumers had sued the bank under the state’s Unfair Competition Laws, claiming that the bank’s practice of posting a day’s debit-card transactions in order from highest to lowest tended to maximize overdrafts, and thus maximize overdraft fees. In 2010 Judge Alsup of the U.S. District Court for Northern California agreed with the plaintiffs in a 90-page decision that took Wells Fargo to task both for the unfair posting order and for fraudulent misrepresentations to customers that claimed transactions were posted as they were received. Today the Ninth Circuit held that posting order is the bank’s decision, as part of its ability under the federal National Banking Act to set fees. However, the finding of fraud stands, and the case has been remanded back to the same Judge Alsup to determine an appropriate amount for restitution, and that amount may well come to $203M.

(Wall Street Journal at www.wsj.com)

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