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Wells Fargo’s $203 Million in Overdraft

Good news for Wells Fargo customers came from the 9th U.S. Circuit Court of Appeals last week.  The appeals court upheld a $203 million award to more than one million customers duped into overcharges by the bank’s practice of deducting the largest charges first, rather than in date order.

The practice produced cascading series of overdraft fees and bigger profits for the bank.  The practice came under heavy criticism and was abandoned by many banks.

But consumer Veronica Guiterrez sued Wells Fargo in a 2008 class action claiming she and other bank customers suffered undue penalties between 2004 and 2008 in alleged violation of California law.

U.S. District Judge William Alsup agreed in 2010 and set the restitution amount at $200 million.

The bank appealed once between on the issue of federal law preemption and won partially, but the 9th Circuit said then that the state still had the right to forbid the bank from misleading the public.

That brings us to the October 29 non-presedential order that again upheld Alsup.  The bank had argued there was no evidence that consumers would have acted differently if they had known about the practice.

The 9th Circuit was not impressed.  The panel said the “record is replete with examples of Wells Fargo’s false and misleading statements” and Alsup’s calculation of restitution was based on factual findings.

The panel did cut back on Alsup’s injunction, which broadly barred the bank from future false and misleading statements.  It is more burdensome to the defendants than necessary to provide the relief from false statements regarding posting order of checks and debit transactions, the court said.

So Alsup must curtail the injunction to eliminate the bar on future false or misleading statements.  But the consumers are still entitled to the restitution.

Case: Gutierrez v. Wells Fargo, No. 13-16195



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