Wells Fargo Ordered To Pay $203 Mln In Overdraft Fee Lawsuit

A federal court has reinstated a $203 million judgment against Wells Fargo & Co. (WFC), alleging that the bank misled consumers on posting of debit-card purchases that resulted in excessive overdraft fees being imposed on them, a lawfirm representing the plaintiffs said Wednesday.

According to the lawfirm Lieff, Cabraser, Heimann & Bernstein, LLP, U.S. District Judge William Alsup on Wednesday issued an order to reinstate the $203 million judgment against Wells Fargo, the fourth-largest bank in the U.S. by assets, saying that the bank violated California's unfair competition law by deceiving its customers. The penalty was earlier imposed by the judge in 2010.

Judge Alsup found, as affirmed on appeal by the Ninth Circuit, that Wells Fargo deceived its customers by saying that debit card purchases would be posted chronologically to their accounts, when in fact the bank posted them in a high-to-low order for the sole purpose of generating overdraft fees. This practice had the greatest impact on the bank's low income customers because their accounts often had the smallest balances.

The case before Judge Alsup was brought by Lieff, Cabraser, Heimann & Bernstein, LLP on behalf of Wells Fargo's California customers who incurred overdraft fees on debit card transactions as a result of the bank's practice of sequencing transactions from highest to lowest. These customers incurred overdraft fees from November 15, 2004 to June 30, 2008.

Michael Sobol, the chair of Lieff Cabraser's consumer protection law group, said, "There has never been any question that Wells Fargo used accounting tricks, and directly misled its customers to hide those tricks, to boost its revenue at the expense of its own customers. It is now time for Wells Fargo to act as a responsible corporate citizen. Over one million California consumers are entitled to relief. They should not have to wait any longer for Wells Fargo to return their money."

Judge Alsup had earlier ordered in August 2010 that Wells Fargo return to its customers about $203 million in restitution and enjoined the abusive accounting practices. The judge's decision followed two and half years of extended litigation which culminated in a two-week bench trial that ended in May 2010.

However, in September 2010, Wells Fargo filed an appeal with the Ninth Circuit Court of Appeals. The appellate court issued an opinion on December 26, 2012, upholding and reversing portions of Judge Alsup's order, and remanded the case to the district court for further proceedings.

In Wednesday's decision, Judge Alsup reinstated the judgment against Wells Fargo, saying "This order is not penalizing Wells Fargo for a practice protected by federal preemption. Instead, it is penalizing Wells Fargo for affirmatively misleading the class as to what the practice was, namely engaging in a practice likely to mislead the class to believe that processing would be done in chronological order when, in fact, processing was done in high-to-low, non-chronological order."

Wells Fargo reportedly plans to appeal the ruling.

WFC closed Wednesday's trading at $39.30, up $0.54 or 1.39 percent on a volume of 25.70 million shares.

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