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Wells Fargo Wins Order Reversing Decision on Overdraft Fees

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Wells Fargo & Co. won its bid to throw out a judge's order that it pay California customers $203 million for manipulating debit-card transactions to boost overdraft fees.

The decision, issued today by the U.S. Court of Appeals in San Francisco, reverses a lower-court order requiring Wells Fargo to cease its practice of charging overdraft fees based on its posting in high-to-low order customers' debit-card transactions. The bank's practice is a "federally authorized pricing decision," the appeals court ruled.

The three-judge panel also returned the case to the district court, finding that Wells Fargo is liable for fraud violations of California's unfair competition law. The lower court was directed to determine what damages, if any, Wells Fargo must pay.

Customers alleged in the 2007 complaint that San Francisco- based Wells Fargo changed the way it treated daily debit transactions and cash withdrawals in 1999 so that transactions with the highest dollar amount posted first, rather than in the order they occurred.

The practice, which customers alleged was intended to boost revenue from overdraft fees, led to account holders overdrawing funds by small amounts multiple times a day, according to the complaint.

Wells Fargo, the biggest U.S. bank by market value, had argued to the appeals court that customers were warned about the practice, which was stated in account agreements and allowed by the Federal Reserve and other national bank regulators.

Ancel Martinez, a spokesman for Wells Fargo, declined to immediately comment on the ruling.

Michael Sobol, a lawyer representing plaintiffs in the case, didn't immediately return a phone call seeking comment.

The case is Gutierrez v. Wells Fargo, 10-16959, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

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