Another class act business appreciating it's customers -- Wells Fargo

[WaterMan]

http://www.google.com/hostednews/ap/articl...kE6xRwD9HHTT580

 

 

Judge orders Wells Fargo to pay back $203M in fees

By EILEEN AJ CONNELLY (AP) – 1 day ago

 

NEW YORK — 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.

 

Copyright © 2010 The Associated Press. All rights reserved.

Edited August 13, 2010 by WaterMan

[SEC=UGA]

One question... These people would make smaller purchase that would not cause them to go into overdraft and then knowingly make a large purchase they could not cover, figuring, "ah, f it, I'll pay the fee for that one charge..." Isn't this similar to passing a bad check? You know the money isn't there but you do it any way... I think what WF is doing is fair, they are teaching these people, through punitive measures, to be more responsible with their account management and also becoming more profitable for their stock holders.

[TimC]

Hey Geithner, Bernanke, Paulson and every other idiot economist out there said we need 25 large super-banks that can screw the people at anytime so let's throw billions of good dollars after bad. For some never-explained reason.

[gbpfan1231]

One question... These people would make smaller purchase that would not cause them to go into overdraft and then knowingly make a large purchase they could not cover, figuring, "ah, f it, I'll pay the fee for that one charge..." Isn't this similar to passing a bad check? You know the money isn't there but you do it any way... I think what WF is doing is fair, they are teaching these people, through punitive measures, to be more responsible with their account management and also becoming more profitable for their stock holders.

Agree here - regardless of how the payments were sorted these people still spent more money than they actually had.

 

The only good thing is that these idiots are now getting money back and will immediately spend it again so it will at least go back into the economy.

[wildcat2334]

Agree here - regardless of how the payments were sorted these people still spent more money than they actually had.

 

The only good thing is that these idiots are now getting money back and will immediately spend it again so it will at least go back into the economy.

 

 

I don't think anyone doesn't think these follios are morans - that isn't the point

 

the bank was using unfair practices to squeeze every dime out customers - it was a ploy and point of emphasis to generate $$ nothing more

 

I would know, back in my rude dog days, it wasn't uncommon for me to have a $39 plate of chicken teriyaki

[WaterMan]

In a class-action ruling, Judge William Alsup, in the U.S. District Court of Northern California, said the San Francisco-based bank improperly charged customers millions of dollars by posting transactions in an order that would generate more fees.

 

Consumeraffairs: “Wells Fargo has devised a bookkeeping device to turn what would ordinarily be one overdraft into as many as ten overdrafts, thereby dramatically multiplying the number of fees the bank can extract from a single mistake,” Alsup wrote.

 

Very nice. Why is the government stopping a business from making money any way possible? This is socialism.

[MikesVikes]

Obama giveth. Obama taketh away.

[ABearWithFurniture]

Say you have $25 in your account...you buy a coffee for $2 from Starbucks, and then later you buy a wolf shirt for $26.00. According to Wells Fargo you now owe them $50 in OD fees as they processed the $26 wolf shirt transaction first which netted them a $25 overdraft fee, and then processed your $2 coffee which netted them another $25 overdraft fee.

 

Another thing they do is process all the debits first, and then process the credits later...more OD fees.

[westvirginia]

Say you have $25 in your account...you buy a coffee for $2 from Starbucks, and then later you buy a wolf shirt for $26.00. According to Wells Fargo you now owe them $50 in OD fees as they processed the $26 wolf shirt transaction first which netted them a $25 overdraft fee, and then processed your $2 coffee which netted them another $25 overdraft fee.

 

Another thing they do is process all the debits first, and then process the credits later...more OD fees.

 

I thought this was illegal since the 70's or 80's - they have to post deposits first???

[Deathpig]

It's not really concluded anywhere here that processing high to low is technically illegal. If it is, the article doesn't expressly state what law/code/rule it violates. I know we have some people here with a lot of financial experience/insight, does anyone know? It sounds like more than Wells Fargo have been doing this for nearly 10 years.

 

Without understanding the legality of the practice, I don't understand the judge's decision (if it's illegal, you'd think the penalty would be much more severe; if it's not illegal can the judge actually rule the company stop and have it enforced?).

 

It just seems like some salient details about the case didn't make it into the article: if the practice has been going on since 2001 to today, why are the 'reparations' only from 2004-08? Overdrafts without offers of consumer protection are illegal, and that was done... what else was handled illegally? Did they change their accounting and business practices without notifying their consumers at all, or was the notification not presented in an ethical manner (footnote fineprint buryed in a mailer, for example)?

 

Wells Fargo screwed up, but I want to know how bad they screwed up. The focus here seems to be misplaced to the business practice, when the legal issues seem to be elsewhere.

[Avernus]

I thought this was illegal since the 70's or 80's - they have to post deposits first???

 

 

Citizens Bank has been guilty of doing this stuff up until I closed my account - so I have no idea how they have been since...

 

shockingly, TD Bank isn't bad....but I'd still like to not have to rely on a bank for purchases...

[WaterMan]

The only good thing is that these idiots are now getting money back and will immediately spend it again so it will at least go back into the economy.

 

I agree. Anyone who trusts their money with a business is an idiot.

[gbpfan1231]

I agree. Anyone who trusts their money with a business is an idiot.

What is your background? Do you hate all businesses and anyone who is successful?

[Ursa Majoris]

I think what WF is doing is fair, they are teaching these people, through punitive measures, to be more responsible with their account management and also becoming more profitable for their stock holders.

Utter crap, possibly the worst you've ever come out with (and that's a heck of a big and competitive field). Since when do businesses get to punish people?

 

Agree here - regardless of how the payments were sorted these people still spent more money than they actually had.

 

The only good thing is that these idiots are now getting money back and will immediately spend it again so it will at least go back into the economy.

You miss the point - the first checks were not drawn against an overdrawn account, thus they should not have attracted a fee. Wells Fargo manipulated the order of processing so that perfectly good checks were counted as overdrawn. See below.

 

Say you have $25 in your account...you buy a coffee for $2 from Starbucks, and then later you buy a wolf shirt for $26.00. According to Wells Fargo you now owe them $50 in OD fees as they processed the $26 wolf shirt transaction first which netted them a $25 overdraft fee, and then processed your $2 coffee which netted them another $25 overdraft fee.

 

Another thing they do is process all the debits first, and then process the credits later...more OD fees.

This.

[gbpfan1231]

Utter crap, possibly the worst you've ever come out with (and that's a heck of a big and competitive field). Since when do businesses get to punish people?

 

 

You miss the point - the first checks were not drawn against an overdrawn account, thus they should not have attracted a fee. Wells Fargo manipulated the order of processing so that perfectly good checks were counted as overdrawn. See below.

 

 

This.

You missed my point - I did not say that the first checks were good or bad - all I said was that these people spent more money than they had. The banks can order mine anyway they dam well want - I don't overspend my account like a responsible person should do so it does not matter one bit to me.

[Ursa Majoris]

You missed my point - I did not say that the first checks were good or bad - all I said was that these people spent more money than they had. The banks can order mine anyway they dam well want - I don't overspend my account like a responsible person should do so it does not matter one bit to me.

They only spent money they did not have when they wrote checks that actually pushed them overdrawn or when they were already overdrawn. The others they were charged for were drawn against good money and therefore should not have been subject to charges, clearly. Wells Fargo charged for checks that were legitimately written, that's the bottom line.

[Clubfoothead]

The same people who support small businesses stealing from the rest of us by not paying their fair share of taxes are the ones who side with Wells Fargo.

 

Why would they not process checks chronologically? So they can screw you is the answer.

[Ursa Majoris]

The same people who support small businesses stealing from the rest of us by not paying their fair share of taxes are the ones who side with Wells Fargo.

 

Why would they not process checks chronologically? So they can screw you is the answer.

This.

 

Why would anyone support this atrocious practice? It's a simple ripoff. No-one disputes banks have a right to charge for what amounts to unauthorized borrowing when a customer goes overdrawn but they have no right whatsoever to charge when that is not the case. I don't get why anyone of whatever political stripe would think this is legitimate unless they are a completely vindictive twit.

Edited August 15, 2010 by Ursa Majoris

[detlef]

It astounds me the degree to which people blindly rush to the defense of business, lest they be labeled as socialist. Keeping businesses from doing things intentionally sleazy is not overreaching, it's simply keeping businesses from doing things intentionally sleazy.

 

Yes, the people ultimately at fault are the ones who overspent. However, that doesn't change the fact that the banks are artificially making the penalty worse by processing the transactions in a way that needlessly costs the consumer more money. Why are we so hell bent on making sure we're protected from the tyranny of government and don't give two poops about being protected from the tyranny of ourselves?

 

It is not their responsibility to manage the transactions in the manner that most benefits the consumer (ie: smallest to largest), but I do think it fair to demand they not do so in a manner with specific intent to maximizes the penalties. If they simply processed the checks as they came in, and let the chips fall where they may, there would be no room to complain. Mind you, a bank could endear itself to the consumer by stating that they make a point of processing transactions in a manner that helps the consumer avoid as many charges as possible. However, the default should be in the order received.

Edited August 15, 2010 by detlef

[Perchoutofwater]

I got to pay a $28 over draft fee a week and a half ago. Of course I knew I was going to have to pay for it. I went into my banker told him I wanted to buy a Polaris Ranger Crew on an ebay auction (sweet hunting vehicle by the way), I told him wasn't liquid enough to do it, and would have to have my broker sell some stocks, but there is a pesky waiting period. I was about to go out of town on vacation and had to pick the vehicle up the day before I left which was Thursday. I wrote a check for considerably more than I had in my banking account on Thursday with the promise that my broker would wire some money into my banking account on either Friday or Monday. My banker initialed the check said he would charge me one $28 overdraft fee for any overdrafts between then and Monday. I got the vehicle I wanted, the banker made $28 and we didn't have to fill out any paper work. Both my banker and me were happy. It's simple, know the rules and play by them. Sometimes they work in your favor.

 

ETA: It amazes me how irritated some people get at the one to two pages of fine print on credit card or banking account agreements, yet have no problems with thousands of pages of regulations that business owners are supposed to know and abide by.

Edited August 15, 2010 by Perchoutofwater

[Ursa Majoris]

I got to pay a $28 over draft fee a week and a half ago. Of course I knew I was going to have to pay for it. I went into my banker told him I wanted to buy a Polaris Ranger Crew on an ebay auction (sweet hunting vehicle by the way), I told him wasn't liquid enough to do it, and would have to have my broker sell some stocks, but there is a pesky waiting period. I was about to go out of town on vacation and had to pick the vehicle up the day before I left which was Thursday. I wrote a check for considerably more than I had in my banking account on Thursday with the promise that my broker would wire some money into my banking account on either Friday or Monday. My banker initialed the check said he would charge me one $28 overdraft fee for any overdrafts between then and Monday. I got the vehicle I wanted, the banker made $28 and we didn't have to fill out any paper work. Both my banker and me were happy. It's simple, know the rules and play by them. Sometimes they work in your favor.

There you go. No problem. However, this scenario isn't the same as the one under discussion as there's only one check involved.

[detlef]

I got to pay a $28 over draft fee a week and a half ago. Of course I knew I was going to have to pay for it. I went into my banker told him I wanted to buy a Polaris Ranger Crew on an ebay auction (sweet hunting vehicle by the way), I told him wasn't liquid enough to do it, and would have to have my broker sell some stocks, but there is a pesky waiting period. I was about to go out of town on vacation and had to pick the vehicle up the day before I left which was Thursday. I wrote a check for considerably more than I had in my banking account on Thursday with the promise that my broker would wire some money into my banking account on either Friday or Monday. My banker initialed the check said he would charge me one $28 overdraft fee for any overdrafts between then and Monday. I got the vehicle I wanted, the banker made $28 and we didn't have to fill out any paper work. Both my banker and me were happy. It's simple, know the rules and play by them. Sometimes they work in your favor.

This has almost nothing to do with what we're talking about. Do you mean to imply that the mere fact that you gladly accepted an overdraft charge because it was the only way you were going to be able to buy a toy you wanted, that it's OK to allow banks to intentionally process checks in a manner that maximizes penalties?

 

You do realize that we're not arguing that charging people overdraft fees is unfair.

[Savage Beatings]

Good ruling by the Judge. Very unethical practice by Wells Fargo and they look like d-bags for appealing with their incredibly lame argument.

[detlef]

I guess it sort of comes down to this. Now this may seem hippy dippy, but if we're going to get through this whole mess, we're going to have to get along. However, I notice an increasing situation where merchant and consumer are at war with one another. And I think it starts up at the top. Banks pull this crap, or BP gives the finger to the Gulf Coast residents, or some other untouchable business acts that way to the consumer, and the next thing you know, everyone is walking around wondering who else is trying to screw them. And it makes it all the way down to guys like me who are just trying to run a neighborhood restaurant. 20 years ago, it was nothing like this. Now, the assumption people take with everyone who is doing business is, "What's this guy's angle. How is he trying to screw me over and what can I do to avoid it."

 

That, of course, results in small businesses having to genuflect before the consumer because, dammit, that consumer is going to get some restitution from someone, and it ain't coming from Wells Fargo. And so the cycle continues. The small business offers less and less services to protect itself from going out on limbs and charges more for less to offset the cost of appeasing random complaints, and it just gets worse. The consumer loses, the small business loses. The only ones who don't lose are those protected from this by size.

 

Obviously, this is not everyone, and I have a ton of great customers, with whom I share a mutual respect. We appreciate their patronage and do our damnedest to make them happy and they, in turn, appreciate us for that effort. They don't feel the need to squeeze me for deals because they don't feel like I'm going to take advantage of them the second they "let their guard down". But it is absolutely out there, and it seems to get worse with time.

 

And this crap is fueling that fire.

[Ursa Majoris]

And this crap is fueling that fire.

If continuous static profits were considered sufficient by Wall Street, there would be no need to constantly look for angles in order to increase profits. The problem the big (public) companies have is that the expectation has been set that profit, however gigantic, is not enough - profits must always increase, according to the Masters of the Universe and their "analysts", otherwise they'll write you down and there goes your share price.