Banks have a way of making their overdraft fees spiral out of control for certain unwary consumers who may be a bit too careless for their own good. Some customers of Wells Fargo decided to hold their bank to task for a policy of overdraft charges that they alleged to constitute consumer fraud and a violation of consumer protection statutes in California. They filed a class action case several years ago in a federal district court.
The federal judge in the case ruled in favor of Wells Fargo debit card holders in the amount of $203 million in restitution to all card holders who were charged for overdrafts from 2004 through 2008. The 9th Circuit Court of Appeals upheld the district court's award, but Wells Fargo battled the appeal all the way to the U.S. Supreme Court. Recently, the Supreme Court refused to hear the appeal, effectively finalizing the lower court determination that the bank had violated consumer protection laws and had used deception in its dealings with its customers.
The bank essentially tried to maximize the number of overdrafts by subtracting the highest charges first, which caused the lower amounts that were payable to also be rejected. Taking the higher amount first depleted the account so that the lower amount would not be covered. This served to increase the number of $25 to $35 fees that the bank was able to extract from the customer's account.
One argument submitted to the Supreme Court by the bank was that the debit card holders never relied on and never read the bank's written policies, which were found to be deceptive. The 9th Circuit had held that the California consumer laws protect customers from the bank's deception regardless of whether they read the bank's fine print. The case is an excellent example of consumers joining together to challenge a massive commercial interest for consumer fraud that a single customer would be largely unable to effectively address.
Source: Los Angeles Times, "Supreme Court upholds verdict against Wells Fargo on overdraft fees in California", David G. Savage, April 4, 2016