Consumer Advocate Legal Update : Class Action Lawyers & Attorneys : Khorrami Pollard & Abir Law Firm : Mass Torts, Products Liability

 On Tuesday, a D.C. federal judge preliminarily approved a $12 million settlement against National City Bank. Back in February, a class action suit was filed against National City Bank alleging that the bank engaged in unlawful and deceptive practices by improperly charging customers overdraft fees on debit card transactions. The plaintiffs claimed that the bank reordered electronic debit transactions from highest to lowest in order to deplete the account funds quickly while still maximizing the number of overdraft fees collected. 

The $12 million settlement allegedly represents 17% to 24% of what the plaintiffs would expect to get at trial. Settlement class members would receive $36 for each eligible overdraft fee incurred during a two month period. One objector complained that limiting the recovery period to two months would insufficiently compensate class members who released their claims for overdraft fees over a six-year period. Judge John Bates said that restricting the recovery to two months prevents “chronic overdrafters … from being unjustly rewarded for their behavior” and added that the two months need not be consecutive. 

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When Bank of America announced that it will no longer require customers to settle disputes with the company through arbitration, rather than being able to go to court, many saw it as a victory for consumers.  However, as David Lazarus reported in Sunday's edition of the LA Times, Bank of America's decision to drop the arbitration requirement does not mean that it is ending its prohibition on customers joining class action lawsuits.  Betty Riess, a Bank of America spokesperson, told Lazarus, "We aren't addressing the class-action waivers as part of [the decision regarding arbitration].  We will preserve the class-action waivers in our agreements."

Class action waivers prevent individuals from joining with other individuals with similar complaints to sue a company.  As Lazarus noted, class actions are arguably the best tool many consumers have to address problems involving relatively small amounts of money as, often, individual lawsuits can cost more to resolve than the amount under dispute, effectively precluding consumers from seeking redress.

In California, class action waivers in consumer contracts may be unenforceable, especially where they violate public policy (such as where the waiver is included in a contract's fine print).  See Discover Bank v. Superior Court (Boehr), 36 Cal.4th 148, 158-160 (2005).  However, many states permit class action waivers in consumer contracts.  Thus, Bank of America's decision is just the first step in protecting consumers' rights.

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