Coral Gables, FL: Citizens Bank has agreed to pay $137.5 million to settle a class action lawsuit which accused the bank of manipulating its customers' debit card and ATM transactions in order to generate excess overdraft fee revenues for the bank.
The lawsuit, part of multidistrict litigation involving more than 30 different banks entitled In re Checking Account Overdraft Litigation, case number 09-cv-02036, is pending before U.S. District Judge James Lawrence King in Miami. Citizens Bank is part of Citizens Financial Group which, through RBS Citizens, N.A. and Citizens Bank of Pennsylvania, operates more than 1,500 retail banking branches throughout the Northeast, the Mid-Atlantic and the Mid-West.
The lawsuit claims that Citizens Bank employed software programs designed to extract the greatest possible number of overdraft fees from its customers. According to the lawsuit, Citizens Bank re-sequenced its customers' debit card and ATM transactions by posting them in highest-to-lowest dollar amount, rather than in the actual order in which the transactions were initiated by the customers and authorized by the bank. According to the lawsuit, this internal bookkeeping practice resulted in Citizens' customers being charged substantially more in overdraft fees than if their debit card and ATM transactions had been posted in the order in which they were authorized by the bank.
Citizens Bank is not the first bank involved in this multidistrict litigation to settle similar claims. Last year, the Court approved a $410 million settlement with Bank of America. Settlements with a number of other banks have been announced over the past six months.