Wells Fargo Overdraft Fee Policy Upheld by Court

Wells Fargo Overdraft Fee Policy Upheld by Court

Wells Fargo may once again charge overdraft fees based on its practice of posting customers' same-day debit card transactions in a high-to-low order.

The U.S. Court of Appeals in San Francisco overturned a lower court ruling that ordered Wells Fargo to pay California customers $203 million for manipulating debit card transactions to boost overdraft fees. The appeals court of appeals said the bank's practice is a "federally authorized pricing decision."

Customers filed the class-action suit in 2007, charging that in 1999, Wells Fargo changed the way it treated daily cash withdrawals and overdraft fees--posting in a high-to low order so the highest dollar amount posted first, making it easier for customers to overdraw by small amounts several times a day and a pay a fee on each overdraft. This increased the bank's revenue from overdraft fees.

The three-judge panel on the U.S. 9th Circuit Court of Appeals overturned the court ruling that blocked Wells Fargo from charging Californians overdraft fees based on posting of debit card transactions in this high-to-low order. It also overturned an order that required the bank to pay its California customers $203 million in restitution because it said the federal law and related regulations permitted this. The appeal panel did uphold a ruling that Wells Fargo misled customers about its posting practices.

The case will go back to district court, which could again order Wells Fargo to pay the restitution.