Just the facts:
1. On 8/8/05 my bank account was overdrawn and on 8/9/05 I was charged the maximum NSF fee of $170 in a single day ($34 per item x 5 items).
2. Here is the ORDER in which BofA chose to process the items (taken directly from my account on their website a few moments ago).
3. These are all electronic debits (VISA ATM).
Date -> Item -> Amount -> Balance
8/8/05 -> Dennis Uniform -> $100.42 -> $5.78
8/8/05 -> Exxon Mobil -> $40.00 -> -$34.22
8/8/05 -> Sakura of Tokyo -> $34.99 -> -$69.21
8/8/05 -> Target -> $30.43 -> -$99.64
8/8/05 -> K-Mart -> $22.94 -> -$122.58
8/8/05 -> Payless Shoes -> $5.40 -> -$127.98
This happened to me once before exactly the same way which leads me to conclude that the bank, even though it may NOT be in violation of it's contract, is, in fact, in violation of California law (Commercial Code Section 4103) which holds them to a standard of commercial reasonableness with regard to overdraft fees. Specifically, here is what they do:
1. They hold all of your transactions until the end of the day, then
2. They exercise the maximum delay in posting deposits to extend the duration of the vulnerable period during which they may exercise overdraft fees.
3. They almost never decline electronic debits. If there are more than 5 electronic debits on any given that are presented against an overdrawn balance, they will hold the presentation of those debits until the following day so that overdraft fees may be collected.
4. They ALWAYS process debits in the order of largest to smallest (see the example above I have others and this is ALWAYS the way it works).
5. 1 thru 4 combined ensures that they will ALWAYS collect the maximum number of overdraft fees possible.
6. In addition, because overdraft fees are presented the following day, they sometimes collect overdraft fees on overdraft fees when an account remains negative. The contract does not prevent them from doing this. Theoretically they can charge you $1054 in overdraft fees on a 31 day month, or $12,410 if you were so stupid as to forget about your bank account for an entire year.
I did some research
My bank's contract states: When you do not have enough available funds to pay all items on a given day, we may pay one or more items, and return other items, in any order we deem appropriate. We may change our processing order at any time without notice to you, even though some processing orders may result in more insufficient funds fees than others (Bank of America California Deposit Agreement and Disclosures, Effective October 1, 2004, page 30).
Translation: If your account is overdrawn, we can present items in any manner that we see fit in order to maximize the penalties against you.
Is this legal? I'm not an attorney, but I did go to the California Law website (http://www.leginfo.ca.gov/calaw.html) to see what the law states. It seems that banking practices with regard to the presentation of items against an overdrawn balance are dealt with in the Commercial Code section. Specifically, there 2 areas, under which, I believe they are in violation of the law.
1. Commercial Reasonableness
a. The California Code specifically regulates the order in which items can be presented. Albeit extensive, the language is specific. The extent of language used to clarify matters here leads me to believe that the intent of the law is such that the bank certainly cannot have an anything goes policy.
b. Commercial Code Sections 3103 and 4103 are the most interesting. In these sections, a standard of commercial reasonableness is established that would seem to govern the bank's behavior. The bank can be held in breach of this standard if they fail to follow ordinary care procedures (Section 3103). This means that the bank must observe reasonable commercial standards, prevailing in the area in which the person is located, with respect to the business in which the person is engaged.
2. Bad Faith
a. California law defines Good Faith behavior on the part of the bank in the following manner: Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.
b. Under Section 4103, the penalty for bad faith is as follows: (e) The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.
a. The bank maintains an anything goes policy, AND
b. The anything goes policy is always exploited to the maximum benefit of the bank every time (not only from my own experience but also judging from the many grievances that are posted here).
C. I think it is reasonable to conclude that the bank is operating on bad faith. In other words, the policies at BofA, and the exercise thereof, always produce a maximum gain for the financial institution while at the same time exploiting the weaknesses of the most vulnerable customers.
If it is not illegal, it is at least immoral, which leads me back to the bad faith conclusion once again.
I do not care if the bank gives me my money back, I would like some justice to be done here. I have the means to carry this out as far as it needs to go and I am willing to suffer further losses to do so.
Diamond Bar, California
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