I just read the article about Bank of America paying $284m to customers who were charged fees for overdrafts on accounts that receive ss benefits. I know there was a case a while back that got us in an uproar, but this one scares me. The judge ruled that the bank didn't disclose in it's reg DD disclosures that fees could be applied to their ss money.

Is it just me, or is this judge wacked? This sounds like reverse discrimination. If someone's source of income is ss, that's their income and that's what I'll use when figuring debt to income on a loan request. Yet, if this same person writes a rubber check, I can't collect a fee, whether paid or not? That is just not right in my world.

Does this judge want banks to refuse to open accounts for people whose income is derived from ss? That was my first reaction. Parts is parts and money is money. Do people on ss have more rights than my other customers? I think not.

I'm wondering if we should add something to our Reg DD disclosures regarding this, in response to the judges basis for decision.

I'm sure there has been other discussion on the threads, I probably just missed out. I just got a little hot under my collar when I saw this. I literally think this decision is reverse discrimination and it will lead to further discrimination.

How do you all handle this? Thanks for your thoughts.

Wyogirl

ABA Newsbytes posted a link to the actual court ruling and the reasons behind it. BOFA apparently violated a California STATE law (actually several of them). I don't think this will have an impact on those of us with no banks in California. Although I have written our attorney to ask if we should treat our customers who have moved to California differently.

I don't know if you have to be a member to receive www.aba.com/aba/documents/news/decision.pdf or not. It is not copyrighted material - it is a public document.

Do you think banker's could get in trouble for adding language to the Reg DD disclosure stating: If you have SS funds placed in your account you may be charged an NSF/Overdraft Fee is you overdraw your account?

Any help?

Thanks!

In 2002's Lopez v. Washington Mutual Bank, the court ruled it was a violation of FEDERAL Social Security Act. Doesn't this FEDERAL law apply to all banks? The ruling said there had to be a "knowing affirmative and unequivocal" consent by the social security recipient. If we only state in our lengthy deposit agreement that we have the right of setoff, I don't see that we have complied with this rule. Sounds like they want something signed.

Lopez vs WaMu and others are in CourtWatch.

Sorry!

The Boston Globe article is: Here

I'm wondering if we should add something to our Reg DD disclosures regarding this, in response to the judges basis for decision.

That won't fly in California. The judge also ruled that you can't put this into a disclosure because it is illegal to use ss deposits to cover other obligations of the customer. BofA laywers told the customer service represntitives on several occasions that doing so was illegal. The judge also cited the bank's advertising/promotional material implied that these deposits were safe. You and I know this was referring to the safety of direct deposit over losing a check in the mail, but she stated that this was meant to convey that it also meant the monies were safe from the right of offset.

See the full court opinion on Lopez v WaMu here

Notably - body of the opinion states this, "In our view, it is sufficient and "meaningful" consent for the recipient to have executed the account agreement which notified him of the bank's standard practice of using deposits to cure overdrafts and then to have provided the bank with a deposit to apply in such fashion."

The conclusion states, "Washington Mutual's practice of applying directly deposited social security and SSI benefits to overdrafts and overdraft charges does not violate 42 USC 407(a) and 1383)d)(a) because there was sufficient consent by the plaintiffs to such practice."

You may need to discuss your current practices with your legal counsel to determine if your account documentation meets the "sufficient consent" standard.

One of the faults the state court found with BOFA was that the language was buried in a 71 page FACTS booklet.

Is this going to open up a horrible can of worms: Where anyone who has an account with any bank and has Direct Deposit of SS funds can sue for ALL od fees that have been taken from that account since they started their SS Direct Deposit? I'm afraid the answer to question.

I can see a possible solution to the problem, though it is more trouble in many ways. If SS payments are deposited in a savings account, this would reduce the likelyhood of fees. In these accounts, minimum balance fees could easily be waived. In addition, if the customer chooses to use those funds in another account, the bank cannot presume how funds were used, therefore eliminating the fee issue? Is this a bit convoluted? lol

The judge has issued the decision in the Miller v. B of A case (December 30). It mirrors the tentative decision issued earlier. It was heard in the San Francisco Superior Court (state court) and will most likely be appealed by B of A. Restitution ordered was $284,385,741.00.

The manual transfer is what will cause the hard-sell and if the "other guy" doesn't require that you'll have heck to pay. But if it is in an ATS account and covers it automatically, the effect would be the same as it is now. Perhaps it will get fixed in a way that applies to national and state laws.

I've read the CA case a couple of times but wasn't clear on whether the issue was both the NSF/OD fees and the actual paid checks OR was it just the checks? It would seem to me that if both the fees and paid checks are the issue; then the only prudent thing to do would be not open the account. Not the best of solutions but if we have to return the checks waive the fee associated with the account; it might be better to close or not open the account. This may be extreme but what other alternative is there...

So is the concensus that we should be adding language to our disclosures or not?

Chris, you've identified the real problem resulting from this case. People who recieve SSA benefits are the ones who will really pay the price if this situation is allowed to stand. We know the SSA understands the implications of this -- it issued this statement about the Lopez case. I just can't understand why the federal government has not yet done anything about this. Congress could very easily pass a bill to take care of this.