J.P. Morgan Chase has agreed to pay $110 million to settle a class-action lawsuit challenging the way Chase charged debit card fees to customers who spent more than what was in their accounts. The settlement will have to be approved by the court. Bank of America agreed last year to pay $410 million to settle its liability in the suit. More than a dozen banks were Defendants in the suit which was filed in Federal District Court for the Southern District of Florida.
The issue addressed in the suit is the manner in which banks have traditionally processed customer transactions. By processing payments in the order from largest to smallest, banks can maximize the amount of overdraft fees charged, if a customer spends more than is available in the account. That practice resulted in a public outcry over the so-called “$38 dollar cup of coffee,” in which a customer overdraws his or her account by buying a $3 beverage with a debit card and is hit with a $35 overdraft fee.
Chase, like other banks, has moved away from that processing practice, and now pays debit transactions in the order in which they occur. In addition, federal rules now require banks to get customers’ permission to receive overdraft protection, which allows them to overspend, but pay a fee. Even with the changes, a recent study found that overdraft fees are still quite high. Many Americans have paid very large overdraft fees for a relatively small purchase.
Source: New York Times
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