JPMorgan Chase & Co. is one step closer to a possible settlement of a class-action lawsuit brought against a number of banks over their so-called transaction-ordering practices. “We’re pleased to have reached an agreement in principle,” said spokesman Patrick Linehan, in which the bank has agreed to pay $110 million. That would settle customer claims that JPMorgan Chase charged excessive overdraft fees by processing transactions by dollar amount from highest to lowest rather than chronologically, which increased the number of overdraft fees incurred by account holders. Reuters’ coverage of the suit describes how one plaintiff was charged $204 in overdraft fees because of the bank’s high-to-low transaction-ordering method, whereas if her transactions had been processed chronologically, she would have incurred only a single fee.
Chase’s settlement of its portion of the suit still needs approval from the judge presiding over the case, which was filed in U.S. district court in Miami. While $110 million might seem like a significant amount, it’s dwarfed by the $410 million Bank of America agreed to pay in November to settle its portion of the same suit, which included more than 30 national and regional banks.
Banks that are still embroiled in the litigation include Wells Fargo & Co., Citigroup, Capital One Financial and PNC Financial Services Group. Wells Fargo is also involved in another overdraft suit in California, where it appealed a judge’s order that it pay $203 million for its actions.
In 2010, the Federal Reserve cracked down on what was then the common practice of banks enrolling customers automatically in overdraft “protection” programs that would process debit purchases even if the transaction would result in an overdraft, then charging fees that could climb as high as $35.
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Many of the larger banks in the U.S. have now abandoned the practice of processing a day’s transactions from highest to lowest dollar amount. It’s still a good idea for customers to check their bank’s policy, seeing as how we collectively paid nearly $30 billion in overdraft fees last year. Although the Fed rules don’t permit a bank to automatically process debit purchases that would overdraw the customer’s account, overdrafts can still be triggered by payments made by check or auto-pay transactions.