BofA Ordered to Pay $75 Million on Fees
A San Francisco jury ordered Bank of America Corp. to pay $75 million in damages, finding it misled more than 1 million elderly and disabled Californians about charges the bank deducted from their Social Security funds.
The plaintiffs complained that the bank illegally took money out of accounts that held direct-deposit government checks to cover bank charges, principally overdrafts and bounced checks. In its verdict Wednesday, the jury found that BofA violated a state law by falsely telling customers that it had the right to tap the Social Security funds to cover fees.
The eight-man, four-woman jury deliberated five days before ordering Charlotte, N.C.-based Bank of America to pay $75 million in damages to customers who had Social Security funds direct-deposited since 1994.
The jurors also decided that the bank must pay a $1,000 penalty to any customer who suffered “substantial” damage. Superior Court Judge Anne Bouliane will decide which customers qualify.
Thomas J. Brandi, one of the lawyers who brought the class-action lawsuit, contended that the penalty should be assessed for each of the approximately 1 million customers who, according to testimony at the trial, had the fees deducted from their Social Security funds over the last decade.
That would bring the total penalties to $1 billion, Brandi said Thursday.
Bank of America spokeswoman Shirley Norton said the company believed the judge would rule that a far smaller pool of customers was substantially damaged. In any event, the bank intends to appeal the verdict because it remains convinced that the state law doesn’t apply to its fees, Norton said.
Trade groups said Bank of America was following standard industry practice, and predicted Social Security recipients would be unable to get overdraft protection at any bank if the verdict were upheld. Leland Chan, general counsel for the California Bankers Assn., said the U.S. 9th Circuit Court of Appeals had upheld Washington Mutual Inc.'s imposition of such fees in a 2002 ruling stemming from a federal law case in San Jose.
Brandi characterized the facts in that case as substantially different. He noted that Bouliane instructed the jury instead to apply a state law barring use of government benefits to repay debts. He said that law was upheld in a 30-year-old appeals court decision involving Wells Fargo & Co.