Wells Fargo smacked seriously by Federal Judge for overdraft fees

Recently, Wells Fargo was charged in a California Federal Court for practices related to their overdraft fees. The presiding judge, William Alsup, slapped Wells Fargo with having to pay back hundreds of millions of dollars to consumers it had unfairly charged. The judge found the bank had intentionally manipulated overdraft procedures to profit intensely, and did not mince words in his choice to penalize the bank for its actions. Numerous contend that a person is better off getting a cash advance than relying on overdraft protection.

Wells Fargo ordered to pay $ 230 million

According to Forbes, Federal judge William Alsup ordered Wells Fargo to pay $ 230 million to customers it has charged overdraft fees. Depending on the amount of the overdraft, a single overdraft fee can carry an APR far higher than a payday loan. Wells Fargo’s practice of clearing the largest charges first, according to the judge, made it more likely that an overdraft would occur, which results in a charge of $ 35 per occurrence.

Wells Fargo took a lot to the bank

Wells Fargo did not make the option to decline transactions or overdraft protection enrollment clear to clients. The judge also cited documents from the financial institution that showed they attached lines of credit to accounts so that all charges would clear and therefore the fee would be unavoidable as a result. The judge also cited that internal communications from Wells Fargo proved the motive was explicitly to profit from overdraft fees. Wells Fargo got $ 1.4 billion from Californians in overdraft fees between 2005 and 2007. A person can almost be better off if they get a personal loan instead of allowing an overdraft to happen.

Overhaul of Overdraft

New rules for banking procedures, especially concerning overdraft procedures and credit cards are being put in place. The Federal Reserve, as outlined by CNN Money, has instituted a rule that mandates banks notify clients of the option to not take overdraft protection. Overdraft fees make the banking industry $ 38 billion a year.

Additional reading at these websites

forbes.com/davidrandall/2010/08/11/how-wells-fargo-cheated-its-customers/?boxes=Homepagechannels

money.cnn.com/2010/05/21/news/economy/consumer_protection/index.htm