Bank of America Backed by U.S. in Suit Over Fees

The federal government is backing Bank of America Corp. in a legal case alleging the bank improperly tapped into Social Security recipients’ funds.

The government urged a California appeals court to block a lower court’s ruling requiring the bank to pay $284.4 million to California customers who said it illegally raided their Social Security benefits to collect fees.

The class-action case involves allegations that the bank from 1994 to 2003 dipped into Social Security direct-deposit accounts to collect fees for overdrafts and other debts owed by the California customers.

Bank of America said the award by San Francisco Superior Court Judge Anne Bouliane in October was contrary to federal and state law. It said it wanted to avoid having to reimburse customers while it appealed.

The government, filing its brief on behalf of the Social Security Administration, the Treasury and the Comptroller of the Currency, essentially said that Bank of America’s practice was common in the industry and that a decision against the bank could disrupt industry services to Social Security recipients.

A call to the plaintiffs’ lawyer in the original case was not immediately returned.