A federal judge in California this week ordered Wells Fargo (WFC) to pay its customers more than $200 million to change what he called “unfair and deceptive business practices” used by the bank.
In a class-action ruling, Judge William Alsup, in the U.S. District Court of Northern California, said the San Francisco-based bank improperly charged customers millions of dollars by posting transactions in an order that would generate more fees.
Consumeraffairs: “Wells Fargo has devised a bookkeeping device to turn what would ordinarily be one overdraft into as many as ten overdrafts, thereby dramatically multiplying the number of fees the bank can extract from a single mistake,” Alsup wrote.
According to the judge,”Internal bank memos and e-mails leave no doubt that, overdraft revenue being a big profit center, the bank’s dominant, indeed sole, motive was to maximize the number of overdrafts”. That policy would “squeeze as much as possible” from customers with overdrafts, in particular from the 4 percent of customers who paid what Alsup called “a whopping 40 percent of its total overdraft and returned-item revenue.” “The bank went to considerable effort to hide these manipulations while constructing a facade of phony disclosure,” the judge wrote.
Wells Fargo said it is “disappointed” with the ruling and will appeal. But of course, ripping off customers is not only legal but clearly a practice many big banks have used and mastered for years. Think about it. Banks’ scheme of charging ‘overdraft fees’ generates about $40 billion a year for the banking industry. Wells Fargo alone has raked in nearly $2 billion from California consumers between 2005 and 2007 alone. So, a $200 mln fine is certainly not gonna hurt the bank’s coffers anytime soon.
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