Wells Fargo was charged in a California Federal Court over its practices involving overdraft fees. Wells Fargo was ruled to have unfairly charged people with overdraft fees, and Judge William Alsup ordered the financial institution to repay them. The judge found the financial institution had deliberately manipulated overdraft methods to profit intensely, and did not mince words in his decision to penalize the financial institution for its actions. Overdraft fees are controversial, and some contend that individuals are better off getting a cash advance than using overdraft protection.
Wells Fargo ordered to pay $ 230 million
Judge William Alsup, as outlined by Forbes, ordered Wells Fargo to pay customers $ 230 million in what he deemed unfair overdraft fees. Overdraft fees often have higher APR than payday loans. One of the practices in question is clearing the largest charges first, which can exacerbate an overdraft of only a few dollars, resulting in a charge of $ 35 per occurrence.
You can bank on high fees
Wells Fargo did not make the option to decline transactions or overdraft protection enrollment obvious 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 cited internal communications from Wells Fargo that almost blatantly expressed the motive for their overdraft policies as being to extricate profits. The bank generated $ 1.4 billion from 2005 to 2007 in California alone. The rate of interest on overdraft fees can be higher than if a person were to get a personal unsecured loan to float them.
An overhaul for overdrafts
New rules for banking methods, especially concerning overdraft methods and charge 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. Banks make about $ 38 billion each and every year from overdraft fee income.
Further reading on this topic
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
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