Citizens Bank Settles Overdraft Fee Lawsuit For $137.5 Million

Citizens Bank is the latest bank to settle in a massive class action lawsuit over dodgy overdraft fee practices. On Wednesday, the midsize New England institution agreed to pay $137.5 million to settle the suit, which is part of a broader class action suit that involves more than 30 banks. A court must still approve Citizens' settlement.

Wednesday's agreement puts Citizens in the company of 12 other banks, including Bank of America and JPMorgan Chase, who have agreed to pay out settlements to customers who were charged unfair overdraft fees. At issue is the financial institutions' method of reordering debit-card transactions from highest to lowest amount--rather than in the order that the transactions occurred--in order to maximize the number of overdraft fees that could be charged to a customer.

All together the settlement money, including the latest agreement by Citizens, will return approximately $750 million to customers, according to the Boston Globe. It is a chunk of change, to be sure, but it represents a very small portion of the billions of dollars banks have made in overdraft fees.

Every settlement in this overdraft lawsuit has represented a different portion of the alleged damages, according to American Banker. In the case of the Bank of America suit, which was approved last fall, the $410 million settlement represented only 10 percent of the alleged damages.

The practice of reordering transactions was a major way for banks to charge customers additional overdraft fees -- typically from $25 to $35 per transaction -- and drive revenue for themselves. Regulation of overdraft protection adopted in 2010 changed the laws to require that banks make it an optional service, rather than the default for all customers. The result of that legislation has saved consumers billions in overdraft fees -- but has taken a major bite from revenue for all banks.

And that is just one of many reasons that has driven banks to increase other fees or add new pricey services. Some banks, like JPMorgan Chase, are putting a renewed focus on getting more high net worth customers.

Other banks, including large regional institutions like US Bank and Regions, are aiming to make money from their low-income customers by offering new services that come with a high-sticker cost, such as short-term loans and fee-laden prepaid cards. According to the New York Times, these services are growing quickly because they largely skirt the regulations that have been put in place over the last few years.

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Comments

[Milly32]

08:28 AM on 05/05/2013

Thank God we have TD Bank here..Citizens Bank really doesnt care about its customers! Its all about the money they can make with fees...Plus I can't stand the fact service is done in India..They moved thousand of operation jobs there per the service rep who helped us on the phone

[Milly32]

08:24 AM on 05/05/2013

I moved my accounts from Citizens Bank when I read my checking account statement. Then when I called them they informed me the moved the RI employees who serviced my account to India. Some guy David Bowerman said US are not as good as folks in India.
Thank God we have TD Bank where we live.

[Sally Brogan]

04:18 PM on 05/03/2013

I would rather live in a box than get a loan from charter one aka citizens! They are con artists and lie!! Worse bank ever!!!!!!!!!!!!!!! I was told I was getting not one but two $450 fees back from a promised mortgage new purchase loan and a refinance and I told the guy I will write him a check for that amount if it comes he said "oh don't say that I assure u it will arrive" NOTHING! What a waste!! How are these scammers still in business?? They would Owe me thousands in fees we will NEVER SEE IT! ANOTHER SCAM BY CITIZENS aka CHARTER ROBBERY BANK!

[plumbheati]

11:38 PM on 04/26/2013

I recieved 2 post cards in the mail from citizens re this lawsuit.i still have a bank acct with them and based on what ive read , I will get a direct deposit from the settlement. I am still waiting, court decided in march, now read here bank agreed this week so send the money, and it better be a good chunk of change, they burned me many times with posting high to low, but also posting my direct deposit paycheck at 6 am every thursday when they recived it the dayu before.... that screwed me big time with auto payments going out weekly.......

[princessatny]

11:57 PM on 05/04/2013

i was told afer the 5th of may checks are going out

[msellersm]

03:17 PM on 03/06/2013

is this just a joke you sent me a letter but i have not seen or hurd from you???

is this another why to ripe us off .where all that money go to???

[68Kate]

02:59 PM on 12/26/2012

Dumped Citizens 3 years ago after repeated transactions being cleared out of order. We actually received a letter from the bank stating that they were looking out for our best interest by insuring that large transations, which tend to be mortgage and car payments, were processed first to 'protect our credit'. I wrote them back as asked how it could be that they knew what was in 'our best interest'. Very pleased with Citadel Credit Union and will never again let any bank have my money. Pleased they were fined, though in the end it was an intential risk/reward decision and they were indeed rewarded. $137.5 million is nothing.

[Victoria Jorge]

03:57 PM on 12/01/2012

I FILLED OUT THE INFORMATION AND NO ONE HAS GOTTON BACK TO ME THIS IS A SCAM BECAUSE YOU HAVE NO WAY OF PROVING HOW THEY STEAL YUOR MONEY AND NOW YUOR THE ONE WHO HAS TO PROVE IT BUT THEY DONT SEND ANY PAPERWORK TO DO SO SOMEONE WHO FOLLOWING THIS LAWSUIT NEEDS TO PROTECT THE CONSUMERS WE ARE THE ONES WHO ARE ON THE SHOT END OF THE STICK ...

[StrScout97]

08:17 PM on 11/23/2012

If you fall into the "non-automatic-payment time period" (I was socked with $700 in fees in 2002 when an automatic bill pay was paid out one day early,) you have to provide copies of your bank statements to be eligible to be included in this settlement. Who the hell keeps bank statements for 10 years?

[AthenasBy Jodi]

06:10 AM on 10/05/2012

Here it is October 2012 and they are still doing it, I dont even know what to do anymore.. just disgusted...

[nubianace]

07:57 AM on 06/16/2012

For years I have written letters and argued with Citizens about their practices. It is truly criminal what they have been doing. I have lost thousands to these greedy bankers. They should be paying billions based on just my experience. Damages and peripheral issues caused by "blowing up" a bank account is just the start of issues caused by this company!! Finally, a little justice.

[Griffey84]

10:37 AM on 06/02/2012

I use to bank with Citizens until this happened to me last year. I'm glad to know that I am not as crazy and the "customer service" person made me out to be. I can do math. I argued with the woman till high heaven that I didn't understand how they could process a transactions out of order. I am so glad I switched to a credit union with some kind of morals. I was unemployed and they took advantage of my situation. I feel terrible for anyone who has to go through what I went through and maybe is in a worse off position. At least I found work and could begin to recover...

[Jonathan Spadafora]

02:25 PM on 05/15/2012

Citizens is still to this date using this practice and just charged me $140 in overdraft fees after reordering my debits Monday 5/14 that were made on Friday 5/11. I should have only received 1 overdraft fee instead I received 4 when they reordered debits from largest to smallest when really my largest debit was the only debit to overdraw me Friday! When is this settlement going into effect and how is this settlement agreed upon while they still continue to rack up millions at our expense and rob us blind!!!

[Valerie Hunsinger]

02:34 PM on 05/09/2012

I recently discovered that my credit union also does this. So you can add the Ingersoll Rand Federal Credit Union to the list. I have banked with them for many years without issue, until recently. When I discovered a bogus overdraft fee, I questioned them and they blamed everyone but themselves. I later found out it was all them, nobody else. I was more than disappointed, let me tell you. I am shopping around for a new bank. Any suggestions??

[yeahthatsme]

09:40 AM on 05/01/2012

I heard the spokesperson of Citizens Bank make a floppy statement to the public in which he clearly refused to take responsibility for this thievery.
Whichever bank is smart enough to say, "We admit our overdraft procedures have not been the most personable way to develop relationships with our clients and we absolutely intend to do much better," will win many customers from these other banks.
Pride and Fear stops companies from saying things like that - to their ultimate demise.

[yeahthatsme]

09:44 AM on 05/01/2012

BTW, I've been pissed at Citizens Bank for this exact procedure (fee-generating software in which largest $ amounts post 1st) and if I were in charge of my family's $ I would have chosen another bank YEARS ago. Leaves a bad taste in my mouth.

[DegenerationX316]

08:15 AM on 05/01/2012

I really try to sympathize with those people that walk into a bank and rob them, but now I don't even care. The need to add PNC Bank into that lawsuit as well. The banks rob the people of their money, but when a bank gets rob they want to cry!