Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Wells Fargo loses overdraft fee case

By Aaron Smith, CNNMoney.com staff writer


NEW YORK (CNNMoney.com) -- Wells Fargo was ordered to pay more than $200 million in restitution to California customers for manipulating and multiplying overdraft fees, a federal judge has ruled.

U.S. District Court Judge William Alsup of Northern California, in his 90-page ruling Tuesday, said Wells Fargo used "a bookkeeping device" that turned one instance of overdrawing an account into as many as 10, allowing the bank to multiply the number of fees it could collect from a single mistake.

"The bank went to considerable effort to hide these manipulations while constructing a facade of phony disclosure," he said.

The ruling said Wells Fargo (WFC, Fortune 500) must pay $203 million in restitution to California customers for its liberal use of $35 overdraft fees. This is a fraction of the $1.8 billion in overdraft fees that the bank collected in California from 2005 to 2007, according to the court.

"The revenue generated from these fees has been massive," wrote the judge.

The ruling concluded a two-week bench trial that ended May 7.

Wells Fargo spokeswoman Richele Messick said that her company was "disappointed" with the judge's ruling.

"We don't believe it's in line with the facts of the case and we plan to appeal," she said.

Paul Miller, analyst for FBR Capital Markets, said that Wells Fargo's handling of the overdraft fees was "always a questionable practice" that has been "going on for years."

But he said that in the future, bank fees are going to become "more up front than back door," especially in the wake of financial reform.

"I think with financial reform in general, a lot of these practices are going to change anyway," he said. "The government is going to take a really hard look at this stuff."  To top of page

Search for Jobs

Index Last Change % Change
Dow 17,651.26 -99.65 -0.56%
Nasdaq 4,725.64 -37.58 -0.79%
S&P 500 2,051.12 -12.25 -0.59%
Treasuries 1.78 -0.02 -0.89%
Data as of 6:12pm ET
Company Price Change % Change
Bank of America Corp... 14.13 -0.23 -1.60%
Freeport-McMoRan Inc... 11.80 -0.21 -1.75%
Apple Inc 94.19 -0.99 -1.04%
Micron Technology In... 10.00 -0.36 -3.47%
General Electric Co 30.07 -0.56 -1.83%
Data as of 4:01pm ET
Sponsors

Sections

Tesla CEO Elon Musk had said previously that the automaker would become "cash-flow positive" this year. But in a letter to shareholders Wednesday, Musk signaled that won't be the case after all. More

The jobs market is near full employment with 14 million jobs added since early 2010. Gas prices are cheap. Home prices are rising. The stock market is near record highs. So why does everyone think the economy stinks? More

Oakland-based tech startup Clef hosts dinners for the local community in a bid to resist gentrification and unite all types of industries that make up the city. More

Visa says new software will allow consumers to check out with chip cards as fast as swiping a card with magnetic strip. More