Bank of America Can Take Your Social Security Checks to Pay for Overdrafts

Higher standards all right.  They used to say BofA was the Mafias bank, but A.P. Giannini must be spinning in his grave.  You dont screw the people who are keeping you in business  (Courtesy: peakmgmt) You dont screw the people who are keeping you alive (Courtesy: peakmgmt)

Higher standards all right. They used to say BofA was the Mafia's bank, but A.P. Giannini must be spinning in his grave. You don't screw the people who are keeping you in business (Courtesy: peakmgmt)

I don’t think that I like this. I don’t think your parents or grandparents would like it either. Banks are going to take BofA’s lead and penalize their customers. From the L.A. Times:

The California Supreme Court unanimously overturned a billion-dollar class-action award against Bank of America Corp. on Monday, ruling that banks can collect overdraft fees from accounts in which government benefits intended for subsistence are directly deposited.

The ruling threw out a 2004 verdict by a San Francisco jury that found the bank violated state law by taking fees for insufficient funds from accounts set up to receive Social Security benefits.

The bank customers who had stood to benefit from the award included 1.1 million California residents receiving government assistance. James C. Sturdevant, who represented the Social Security recipients, said the award, with interest, would have cost Bank of America more than $2 billion.

He said banks earn about $40 million a year from overdraft charges and that some of the Social Security recipients in the suit lost 20% of their monthly income in a single day because of bank fees.

Those bank fees could be from $25-$35 per bounced check and perhaps more, depending on the institution.

I know that it is not just ineptitude or laziness that these retirees incur bank fees, and it’s not necessarily  just hard times. The banks can make you bounce a check by using a procedure called high to low check processing.

This is how it works. When several checks arrive on a given day for a particular account, the bank processes the largest one first, raising the odds that the other checks will bounce. And they do.  This was the basis for the class action suit.  If your bank charges fees like $25 per bounced check, and you have four checks that bounce, that’s $100, plus the amount of the checks. Imagine your surprise if your $1000 Social Security check arrives $200 short in your bank account.

Here is how six major bank corporations process their incoming checks (from an article in the Wall Street Journal):


BankAmerica Largest checks first in Eastern U.S., three different methods elsewhere
Citigroup Smallest checks first
Chase Manhattan Largest checks first
Bank One Smallest checks first in bank departments; by check number elsewhere
First Union Largest checks first

Perhaps it would behoove you to check your bank’s procedures, too.

The court noted that an overdraft could stem from a bank’s honoring a rent or utility payment before the government benefits have been deposited.

“Requiring banks to dishonor checks can harm the customer’s credit rating, result in the customer’s incurring fees and affect the customer’s relationship with merchants,” Justice Carlos R. Moreno wrote for the court.

Sturdevant said the court’s ruling would punish the poor.

“They don’t have a credit rating,” he said. “These are the poorest of the poor. They live on $800 a month.”

Walter Dellinger, who represented Bank of America, said he was pleased that the court concluded that the bank’s practices were “entirely lawful.”

Hell no, it isn’t lawful. I left one bank because they pulled this kind of thing on me, to the point that I didn’t have a paycheck for myself for three weeks because I had to remunerate the bank. I learned. I left that place, which is still crying poor mouth to Congress and the taxpayers, and went to a credit union.

If there is no money in the bank, there is nothing there. Period. In my case, they honor overdrafts up to about $100, and then the checks are returned, and you have to deal with it. A credit union is not trying to make money off you like these phantom banks, or banks in name only.  It serves the employees and the students. Sure, they are more stringent, but they are eager for your business and eager to please.

Don’t get rooked.  Let the banks feel some more pain and open a credit union account. They have to earn our trust again.

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~ by blksista on June 2, 2009.

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