For years, consumer advocates have fought the practice by banks of clearing the largest check or debit first on any given day, arguing that it simply raises the chances of collecting more overdraft fees. Webster Bank, one of Connecticut’s largest banks, will pay $2.8 million to settle a class-action lawsuit alleging the Waterbury-based bank used the practice in hopes of collecting more overdraft fees. Penalty fees have become a crucial component of fee income for many banks.
The settlement, disclosed in a regulatory filing, comes after a landmark ruling in August in which a federal court required Wells Fargo & Co. to repay $203 million in overdraft fees reaped because the bank, which owns the Wachovia name in Connecticut, cleared the largest checks first on a given day in a consumer account. The Webster settlement comes after a lawsuit filed in Connecticut in April and will also resolve a similar suit against Webster in New York. Robert Izard, the lawyer who filed the Connecticut lawsuit, said that Webster now clears checks in the order they are received. The proceeds from the settlement will be distributed to Webster customers.
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