U.S. Bank will pay $55 million to settle overdraft litigation against it, according to a filing in Southern Florida U.S. District Court.
Plaintiffs in the case alleged that the bank, along with dozens of its peers, manipulated the order in which customers' debit card payments were processed at the end of each day. By subtracting the largest amounts from customers' accounts first, banks accelerated the depletion of their accounts and caused customers to rack up more overdraft fees.
"We are pleased to have achieved this result for U.S. Bank customers who were adversely affected by this anti-consumer practice," said Bobby Gilbert, an attorney for the plaintiffs, in a press release.
Dozens of lawsuits filed in recent years have alleged that banks hid this practice and their motivation for engaging in it. For the largest banks, reordering payments used to produce hundreds of millions of dollars in extra fee revenue every year.
While the plaintiffs have not yet revealed the total cost of the debit re-sequencing for U.S. Bank's customers, the $55 million payout may be smaller as a percentage of the alleged damages than that recovered by plaintiffs in the other cases.
One likely reason for this is that U.S. Bank had mandatory arbitration clauses in its checking contracts. These clauses could have allowed the bank to escape from the class action entirely. A Supreme Court ruling from last year, AT&T v. Concepcion, strengthened the legal position of arbitration requirements.
"As a result of Concepcion, U.S. Bank customers face the prospect of being forced to pursue their claims through individual arbitrations, rather than through a class action in a court of law," Gilbert said.
U.S. Bank's settlement comes just a few days after PNC Bank settled similar allegations brought by the Miami plaintiffs. PNC agreed to pay $90 million.
All told, major banks have paid or agreed to pay around $1 billion to settle the litigation to date.