Wells Fargo & Co. must pay more than $200 million in restitution to California banking customers for deliberately manipulating debit card transactions in order to trigger overdraft fees, a federal judge ruled on Aug. 10.

U.S. District Judge William Alsup of the Northern District of California said in a 90-page ruling that beginning in April 2001, Wells deliberately began processing customers’ largest transactions first, causing some customers to be charged up to 10 different $35 overdraft fees when a single transaction exceeded their limit by only a few dollars. The policy had the immediate effect of maximizing the number of overdraft fees imposed on customers, Alsup said.

Wells used a “secret” bank program called “the shadow line” to carry out the policy, so that overdrafts took place at the point of sale without any notification to the customer, according to Alsup. “Thus, a customer purchasing a two-dollar coffee would unwittingly incur a $30-plus overdraft fee,” the judge wrote.

The bank said it is “disappointed” by the ruling and plans to appeal it.

 “We don’t believe that the ruling is in line with facts of this case ... Wells Fargo’s method of processing transactions has been appropriate and consistent with customers’ interests,” the bank said in a statement.

A separate class action suit against several banks is under way in Florida; defendants include Wells Fargo, Wachovia Corp., Citigroup Inc. and JPMorgan Chase & Co. (see story).

What do you think about this? Send us your feedback. Click Here.


Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry