Outcome:$1.2 billion in injunctive relief, and $66.6 million in cash and debt relief
Farrell v. Bank of America, N.A., 3:16-cv-00492-L-WVG, United States District Court for the Southern District of California
Plaintiffs reached an agreement with Bank of America, N.A. (BANA), culminating in a class action settlement valued at over $1.2 billion and affirmed on appeal.
Background
The class action lawsuit centered on Bank of America’s practice of imposing a $35 EOBC against account holders who failed to rectify negative balances within five business days of the overdraft. The plaintiffs challenged this charge as an improper extension of credit at usurious interest rates under the National Bank Act (NBA) and related regulations.
Key Settlement Highlights:
Monetary Relief: The settlement agreement stipulates a dual-structured monetary relief comprising a $37.5 million cash Settlement Fund alongside a $29.1 million Debt Reduction Amount. This structured relief aims to benefit the members of the Settlement Class directly, providing both immediate financial compensation and long-term financial relief.
End to Extended Overdrawn Balance Charges (EOBCs): In a significant move towards fair banking practices, Bank of America has agreed to immediately cease assessing Extended Overdrawn Balance Charges on consumer checking accounts for a five-year period. This cessation translates into an estimated $1.2 billion in savings for the bank’s customers, addressing one of the central grievances of the class action lawsuit.
Significance:
This settlement stands out, especially given the backdrop of similar cases facing dismissals in federal courts. It reflects a commendable negotiation effort by Class Counsel to ensure substantial relief for affected customers and enforce a meaningful stop to a contentious banking practice. The United States Court of Appeals for the Ninth Circuit noted about the case, “[T]he district court concluded that class counsel demonstrated ‘tenacity and great skill,’ achieving a ‘remarkable’ result in a ‘hard fought battle’ despite an ‘adverse legal landscape’ and the ‘substantial risk of non-payment.’ . . . This was a ‘risky’ case, and the result negotiated for the class was ‘exceptional.’” This settlement not only provides immediate financial relief and debt reduction but also establishes a forward-looking safeguard against unfair charges, rectifying a significant concern for countless Bank of America customers.