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Wells Fargo Allegedly Charged Overdraft Fees on Closed Accounts

According to reporting by the New York Times, troubled bank Wells Fargo may have charged customers overdraft fees for certain closed bank accounts, despite notifying the customers that the accounts were closed and that no transactions would be processed after a given date.

Despite rules meant to rein in excessive overdraft fees charged by banks, according to information from the Federal Deposit Insurance Corporation (FDIC), overdraft fees are big business.  According to a 2016 FDIC survey, approximately 600 banks included in the data collected $2.7 billion in overdraft fees in the first quarter of 2016 alone.

In 2010, financial institutions were ordered to obtain consent before customers could be charged overdraft fees for ATM and debit card transactions.  Prior to that, customers who attempted to make a debit purchase or a withdrawal that exceeded the amount in their account could potentially have the transaction approved, but be charged an overdraft fee of up to $35 even if they had not authorized an overdraft on the account.

Other overdraft fee practices that have led to legal action including class action lawsuits involve the re-ordering of transactions in a customer’s checking account to process larger transactions first, pushing the account into a negative balance by clearing the larger transaction, and then charging an overdraft fee for each of the remaining pending smaller transactions (checks or other debits).  Some financial institutions have faced lawsuits alleging the reordering of transactions violated their client agreements.

Wells Fargo reportedly has a surprising source of overdraft fee revenue- closed accounts.  According to reporting by the New York Times, because of the way Wells Fargo’s computer system handles closed accounts, an account the customer believes to be closed can stay open if it has a balance, even one below zero.   The New York Times further reports that in such an instance of a closed account that has a balance (whether positive or negative), when a transaction is processed for an overdrawn account, Wells Fargo may tack on an overdraft fee.

According to the New York Times, when Wells Fargo decides it will close an account, it usually informs customers in a letter that lists two important dates.  The first is the date deposits can no longer be accepted.  The second, which is two weeks after the first, is the date after which no more withdrawals will be honored and the account will be closed.   The New York Times also reports that Wells Fargo told customers that any payments that are automatically withdrawn from their accounts would be discontinued after the accounts were closed.   However, according to the New York Times, in fact, Wells Fargo allegedly had set up its computer system to keep such accounts open if they have a balance- whether positive or negative- even after the closing date.

Consumers who wish to discuss a possible claim concerning bank overdraft fees or other financial issues may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at for a no-cost, confidential consultation.  Attorneys at the firm are admitted in New York, New Jersey, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

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