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The Bank of America overdraft lawsuit has come to a tentative end, with a federal judge granting preliminary approval of a $410 million settlement between the bank and 1 million of its account holders.
Though Bank of America is the only defendant thus far to settle the overdraft lawsuit, the publicity and scrutiny that the suit has brought to overdraft fees has resulted in important regulation and a heightened level of consumer protection.
This settlement stems from a 2009 class action lawsuit filed against Bank of America and a host of other banks, such as Wells Fargo, Citigroup and Chase.
Plaintiffs alleged that the banks were processing debit transactions from largest to smallest instead of chronological order, which caused balances to fall quickly, resulting in multiple overdraft charges, reports Reuters.
They also argued that this process overwhelmingly burdens low-income customers who keep low balances and/or cannot afford the fees.
In response to the Bank of America overdraft fiasco, the Federal Reserve implemented new rules for debit and ATM cards, which are most likely to incur fees.
Banks must now obtain a customer's permission to charge overdraft fees for routine debit and ATM transactions, otherwise their cards will simply be declined if there are not sufficient funds.
And for customers of Bank of America, overdraft fees are now non-existent unless a customer overdraws excessively.
A hearing has been set for November 7 to finalize the settlement, reports Reuters. The Bank of America overdraft lawsuit should come to an official end on that day.