BofA to settle overdraft suit

24 May 2011

The Bank of America (BofA) is to pay $410 million in a bid to settle its share of a lawsuit that centres on excessive overdraft fees on debit cards.

Such a deal has been tentatively approved - and comes after consumers accused lenders in the US of manipulating debit transactions in order to increase the fines paid by customers who had gone over their account balance.

The system that has been brought under the spotlight saw such payments recorded with the largest transaction first - rather than in chronological order - which led to peoples' accounts reducing at a faster rate.

A spokeswoman said BofA was pleased to reach a fair resolution to the matter, adding the bank is "advocating for a standard solution that would ensure a consistent posting order approach across the industry", the Wall Street Journal noted.

Recent analysis carried out by Professor Renee Adams of the Financial Markets Group at the London School of Economics suggested the power of the biggest banks in the US is becoming so great that they may be able to 'capture' the Federal Reserve.

By Asim Shah

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