Judge Tries, Again, To Slap Wells Fargo With $203 Million For Overdraft Policy

It’s been nearly three years since a U.S. District Court first ordered Wells Fargo to pay out $203 milllion in refunds to settle a class-action suit involving the bank’s overdraft policies. Since then, the bank got a U.S. Circuit Court of Appeals to set aside that mountain of cash, saying California law can not override federal banking laws. Now the original District Court judge is once again ordering the bank to fork over the $203 million.

The case involves the policy known as “stacking” bank transactions, in which a bank processes a customer’s larger transactions before the smaller ones. This increases the likelihood of the customer overdrafting and enriches the bank, which can reap multiple overdraft penalties for each of the smaller transactions.

Recent reports show that banks earned around $30 billion in overdraft fees in each of the last two years.

The plaintiffs alleged that Wells Fargo’s policy violated a California consumer protection law. In 2010, the judge in the case ordered the bank to pay the $203 million to customers of Wells Fargo who were affected by the overdraft policy between Nov. 2004 and June 2008.

However, in late 2012, the Appeals panel ruled that because federal laws allow stacking, the California law could not declare the policy illegal.

That being, said Appeals panel upheld the lower court’s decision that Wells Fargo had used “misleading propaganda” to deceive customers into believing their transactions were being processed in the order in which they were made. It sent the case back to the District Court for the judge to decide on how much should be paid out for that bad behavior.

But instead of going with a smaller amount, U.S. District Judge William Alsup simply reinstated the full $203 million penalty.

Not surprisingly, a Wells Fargo rep tells Consumerist the bank plans to appeal.

“We are disappointed with the judge’s ruling,” says the rep in a statement. “We don’t believe that the ruling is in line with the facts of this case, or the law and we plan to appeal.”

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