- Associated Press - Monday, November 7, 2011

MIAMI — A federal judge has approved a $410 million settlement in a lawsuit claiming Bank of America charged excessive overdraft fees.

The decision Monday by Senior U.S. District Judge James Lawrence King affects more than 13 million current and former bank customers who used debit cards in the past decade.

The class-action lawsuit claimed that Charlotte, N.C.-based Bank of America processed its debit card and check payments in a way that triggered more overdrafts and therefore more fees. The bank insists the system was proper despite the settlement of the 2½-year-old case.

Attorneys for the bank and the customers both told Judge King the agreement was fair and reasonable, even though customers would only receive a fraction of what they paid in overdraft fees. The settlement includes an estimated $123 million in legal fees for plaintiffs’ lawyers.

“It’s really undisputed that this is one of the largest settlements ever in a consumer case,” said Aaron Podhurst, a lead attorney for the customer class.

The settlement comes a week after Bank of America backed off a plan to charge a $5 monthly fee for debit-card purchases. The outcry prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel trial tests of their own debit card fees.

Bank attorney Laurence Hutt said 13.2 million Bank of America customers who had debit cards between January 2001 and May 2011 would get some payment. Those who still have accounts would get an automatic credit and the others would get a check mailed to them. No one would have to take any action or fill out any paperwork.

Mr. Hutt said only 46 customers filed formal objections to the settlement and 350 decided to opt out, meaning they could take separate legal action on their own.

“It’s very easy for people to say on the sidelines, ‘I could do better,’ ” Mr. Hutt said. “Never is a settlement at 100 percent of what somebody thinks they can receive at trial. It’s always a compromise.”

Customers will receive a minimum of 9 percent of the fees they paid through the settlement, Mr. Hutt added. The bank has already paid the money into an escrow account.

The lawsuit claimed that Bank of America processed its debit card transactions in the order of highest to lowest dollar amount so it could maximize the overdraft fees customers paid. An overdraft occurs when the account doesn’t have enough money in it to cover a debit card transaction. Similar lawsuits have been filed against more than 30 other banks.

New regulations enacted following the recent financial crisis prohibit banks from charging overdraft fees on debit cards without first getting customer permission.

Many of the objections concerned the $123 million attorney fee. Lawyers for people opposed to the settlement said that amount should have been cut down by at least $50 million, with the money going back to the wronged customers.

“The best use is to provide compensation to the class members,” said Elliott Kula, who represents some of the objectors.

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