Bank of America Wins Right to Gouge Seniors

In February 2004, a San Francisco jury hit the financial behemoth Bank of America with an enormous verdict in a class action filed by seniors and disabled people whose public benefit accounts the bank had raided to cover overdraft and other fees, in violation of California law. The verdict threatened to top a billion dollars and promised to change the way banks do business.

Bank of America, like most banks, processes checks so they bounce more often and generate overdraft fees, and then automatically takes the fees out of customers' accounts. When collecting these fees, banks don't have to abide by any of the debt-collection laws that apply to other businesses. Because they've already got your money, they just take it. The California class action threatened to put the brakes on some of these practices.

But nickel and diming customers like this is a $55 billion a year business for the nation's banks, which is why the industry has fought the California verdict tooth and nail. Even the Bush administration got involved in the appeal, arguing that California state law was preempted by the federal bank regulations enforced by the useless Office of the Comptroller of the Currency, which does nothing to protect consumers.

Alas, yesterday a California appeals court overturned the verdict entirely. The plaintiffs will naturally appeal, but the future doesn't look good for bank consumers, for whom the case promised a small beacon of hope for relief from abusive bank practices.