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Old 08-11-2010, 11:17 PM   #1
SpiritWarrior
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Cool Dude Judge orders Wells Fargo to pay back $203M in fees

Anyone see this? While this is great news, and those who are with WF as a bank know EXACTLY what the judge is talking about - not just in overdraft fees, but in the order at which fees show up, I am a bit confused though. From what I can tell here, the judge basically reversed every overdraft fee ever made to their customers between 2004-2008? It seems almost too good to be true. It says "as a result of the policy" which I think most people's situations are a result of when you think about it. AMIRITE?

Quote:
NEW YORK (AP) -- A federal judge in California ordered Wells Fargo & Co. to change what he called "unfair and deceptive business practices" that led customers into paying multiple overdraft fees, and to pay $203 million back to customers.

In a decision handed down late Tuesday, U.S. District Judge William Alsup accused Wells Fargo of "profiteering" by changing its policies to process checks, debit card transactions and bill payments from the highest dollar amount to the lowest, rather than in the order the transactions took place. That helped drain customer bank accounts faster and drive up overdraft fees, a policy Alsup referred to as "gouging and profiteering."

Wells Fargo adopted the policies beginning in 2001, and they became widespread across the banking industry. It is unclear how the ruling would apply to the rest of the industry.

The ruling detailed the experiences of two Wells Fargo customers who used their debit cards for multiple small purchases, and were then charged hundreds in overdraft fees because the order the purchases were cleared by the bank depended on the amounts. The judge found the customers, who were part of a class action, were not properly informed of the bank's policies on processing payments and were unaware the bank would allow debit purchases to go through when their accounts were overdrawn.

"Internal bank memos and e-mails leave no doubt that, overdraft revenue being a big profit center, the bank's dominant, indeed sole, motive was to maximize the number of overdrafts," Alsup wrote. That policy would "squeeze as much as possible" from customers with overdrafts, in particular from the 4 percent of customers who paid what he called "a whopping 40 percent of its total overdraft and returned-item revenue."

The judge dismissed Wells Fargo's arguments that customers wanted and benefited from the policies, and detailed evidence he said showed efforts to obscure the practices in statements and other materials. Wells Fargo's online banking system, for example, would display pending purchases in chronological order, "leading customers to believe that the processing would take place in that order."

"The supposed net benefit of high-to-low resequencing is utterly speculative," he wrote. "Its bone-crushing multiplication of additional overdraft penalties, however, is categorically assured."

Alsup also criticized the bank for allowing overdraft purchases after accounts had been drained by offering a "shadow line of credit" that customers were unaware existed.

The decision noted that the Federal Reserve has outlawed some of the practices detailed in the case, most notably debit card overdrafts permitted without customers agreeing to accept overdraft protection.

Judge Alsup ordered Wells Fargo to stop posting transactions in high-to-low order by Nov. 30 and to reverse overdraft fees charged to customers from Nov. 15, 2004, to June 30, 2008, as a result of the policy. A study cited in the decision by a Wells Fargo witness put the restitution at "close to $203 million."

Wells Fargo spokeswoman Richele Messick said the bank is "disappointed" with the ruling. "We don't believe the ruling is in line with the facts of this case and we plan to appeal," she said.

Messick noted that Wells Fargo changed its policies earlier this year, and customers can no longer incur more than four overdraft charges in one day.

Wells Fargo shares closed Wednesday trading down $1.47, or 5.3 percent, at $26.30, as the broader markets dropped sharply on economic concerns, with banks being particularly hard hit.

The case, heard in the U.S. District Court for Northern California, is Gutierrez vs. Wells Fargo.
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Old 08-12-2010, 10:42 AM   #2
Timber Loftis
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Default Re: Judge orders Wells Fargo to pay back $203M in fees

That estimated $203M is a pittance for WF, and they'll drag out an appeal for years before ever paying it.

The practice preyed on the most vulnerable customers -- those who live life close to the $0 mark. It's crazy that they could even think of doing two of these practices: rearranging transactions and allowing debit cards to be approved when there was no money to back them up.
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Old 08-12-2010, 11:43 AM   #3
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Default Re: Judge orders Wells Fargo to pay back $203M in fees

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Originally Posted by Timber Loftis View Post
That estimated $203M is a pittance for WF, and they'll drag out an appeal for years before ever paying it.
You mean the way Wal-mart has spent absurd amounts of money on lawyers to fight a couple thousand dollars in fines to OSHA because an employee got trampled on Black Friday?
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Old 08-12-2010, 12:37 PM   #4
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Default Re: Judge orders Wells Fargo to pay back $203M in fees

IMHO, it is an objectionable business practice. I understand it, but it's a great way to piss off your customers.

WRT WF, in 2008 they were a $41.9 billion company with profits of $2.7 billion. As TL says, this is a drop (albeit a big one) in the bucket.

The ripples are what I think will be interesting. If WF did this to me several years ago and caused me to default on my nearly-paid car loan, and that car was repossessed, would I have cause to go back to WF to seek compensation, since what they did was "unfair and deceptive"? How about that house that was foreclosed on? The appliances that were repossessed? The apartment I couldn't get into because I couldn't afford the deposit, since WF absconded with so much of my money?

And of course, extend that to other financial institutions. They've *got* to be examining this for how it will impact them.

We haven't heard the last of this, I'm thinking.
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Old 08-12-2010, 05:37 PM   #5
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Originally Posted by Bungleau View Post
IMHO, it is an objectionable business practice. I understand it, but it's a great way to piss off your customers.

WRT WF, in 2008 they were a $41.9 billion company with profits of $2.7 billion. As TL says, this is a drop (albeit a big one) in the bucket.

The ripples are what I think will be interesting. If WF did this to me several years ago and caused me to default on my nearly-paid car loan, and that car was repossessed, would I have cause to go back to WF to seek compensation, since what they did was "unfair and deceptive"? How about that house that was foreclosed on? The appliances that were repossessed? The apartment I couldn't get into because I couldn't afford the deposit, since WF absconded with so much of my money?

And of course, extend that to other financial institutions. They've *got* to be examining this for how it will impact them.

We haven't heard the last of this, I'm thinking.
Yeah it sure does piss you off. I think it hurt their rep. in the way slamming people with illegal charges hurt SBC's rep. Shortly after, they merged with AT&T and dumped the SBC title so people would think this is a new company.
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Old 08-15-2010, 02:08 AM   #6
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Default Re: Judge orders Wells Fargo to pay back $203M in fees

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Originally Posted by SpiritWarrior View Post
From what I can tell here, the judge basically reversed every overdraft fee ever made to their customers between 2004-2008? It seems almost too good to be true. It says "as a result of the policy" which I think most people's situations are a result of when you think about it. AMIRITE?
I don't think the ruling would call for a refund of every overdraft fee. WF is supposed to refund the OD fees that were a result of this policy--so if one day, a person got hit by 4 OD charges because they were ordered biggest to smallest, they would have been hit by at least on OD fee regardless of what order they were processed. And if the test to see which OD fees to refund is to reorder the charges in chronological order, that customer might still be hit with 2 or 3 of the 4 OD charges.

So on any given day that OD charges were triggered, the customer would still owe at least one of them (otherwise there would have been no OD in the first place), and possibly more.

What I don't understand is why a bank that is pulling in over a billion in profit is being so aggressive with a policy that most customers and potential customers will be outraged by when they find out about it--especially if it only brought in 203M over 4 years. Why risk the PR hit for 50M/year when you're pulling in 2B overall?
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Old 08-15-2010, 02:59 AM   #7
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Default Re: Judge orders Wells Fargo to pay back $203M in fees

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Originally Posted by Olorin View Post
What I don't understand is why a bank that is pulling in over a billion in profit is being so aggressive with a policy that most customers and potential customers will be outraged by when they find out about it--especially if it only brought in 203M over 4 years. Why risk the PR hit for 50M/year when you're pulling in 2B overall?
It's all about the short term gains these days. Goldman Sach's policy used to be called "long term greedy" -- meaning they were investing smartly for the long haul. These days though it's all about the quick buck: get in, sell the watermelon you're pushing out the window, get out before it hits the pavement.
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Old 08-15-2010, 09:49 PM   #8
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Thumbs Up Re: Judge orders Wells Fargo to pay back $203M in fees

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Originally Posted by Olorin View Post
I don't think the ruling would call for a refund of every overdraft fee. WF is supposed to refund the OD fees that were a result of this policy--so if one day, a person got hit by 4 OD charges because they were ordered biggest to smallest, they would have been hit by at least on OD fee regardless of what order they were processed. And if the test to see which OD fees to refund is to reorder the charges in chronological order, that customer might still be hit with 2 or 3 of the 4 OD charges.

So on any given day that OD charges were triggered, the customer would still owe at least one of them (otherwise there would have been no OD in the first place), and possibly more.

What I don't understand is why a bank that is pulling in over a billion in profit is being so aggressive with a policy that most customers and potential customers will be outraged by when they find out about it--especially if it only brought in 203M over 4 years. Why risk the PR hit for 50M/year when you're pulling in 2B overall?
Yes, see, any OD fees I have ever had to pay were indeed a direct result of this. I even bitched about it once or twice on IW....how deceptive my bank is. It almost feels like It's out to get you rather than there to help you save money. And I have two houses with them not to mention credit card lines so I daren't leave. I have called them in the past, demanding they remove some OD fees that had no business being there. They complied for the most part.

And of course, people say to me, "Oh, you should write everything down". But in this day and age of quick lunches and card swiping for almost every purchase, it is just not practical. WF knows this and saw an opportunity to profit from it. Their online banking system creates the illusion informative real-time tracking, only to barrage you with charges on Tuesdays that you had completely forgotten about. I have had charges show up weeks late that stores confirmed were already processed. I mean, you will see the old ladies at the grocery store in front of you, with their chequebooks in hand and holding up the queue as they document it all. I am sure they never incur such fees. But I don't have the time, I admit it, but because of that should my own bank be able to screw me so badly just because I like to make use of it?
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Old 08-16-2010, 08:08 AM   #9
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Default Re: Judge orders Wells Fargo to pay back $203M in fees

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Originally Posted by SpiritWarrior View Post
Yes, see, any OD fees I have ever had to pay were indeed a direct result of this. I even bitched about it once or twice on IW....how deceptive my bank is. It almost feels like It's out to get you rather than there to help you save money. And I have two houses with them not to mention credit card lines so I daren't leave. I have called them in the past, demanding they remove some OD fees that had no business being there. They complied for the most part.

And of course, people say to me, "Oh, you should write everything down". But in this day and age of quick lunches and card swiping for almost every purchase, it is just not practical. WF knows this and saw an opportunity to profit from it. Their online banking system creates the illusion informative real-time tracking, only to barrage you with charges on Tuesdays that you had completely forgotten about. I have had charges show up weeks late that stores confirmed were already processed. I mean, you will see the old ladies at the grocery store in front of you, with their chequebooks in hand and holding up the queue as they document it all. I am sure they never incur such fees. But I don't have the time, I admit it, but because of that should my own bank be able to screw me so badly just because I like to make use of it?
You do have the time to write your purchases down. You may not take the time, but that is a personal choice. The time is available if you choose to use it.
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Old 08-16-2010, 08:22 AM   #10
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Ironworks Forum Re: Judge orders Wells Fargo to pay back $203M in fees

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You do have the time to write your purchases down. You may not take the time, but that is a personal choice. The time is available if you choose to use it.
Which, I just said. Do you write every purchase you ever made down?
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