Wells Fargo's "Neat Tricks" Took Millions from Customers

San Francisco, CAAmerican consumers have won a halleluiah verdict in a bank overdraft charge class action suit against Wells Fargo. A California judge has ordered the megabank to pay class members a total of $203 million in restitution and the phone at the law offices of Lieff, Cabraser, Heimann & Bernstein has not stopped ringing since.

"You cannot believe the reaction we are getting from consumers across the country to this decision," says Richard Heimann, whose firm represented the class. "It's just a ground swell of folks expressing their unhappiness with the practice and with how banks treat people generally."

"I have so much email I can't even get through it all," Heimann adds. "They are congratulating us; they are asking if we will do the same for them because their bank does the same thing."

The 90 page findings of fact in the case is a heck of a good primer on the Wells Fargo Bank's plot to boost profits by what Judge William Alsup described as "neat tricks" that "generated colossal sums per year in additional overdraft fees" for the bank.

Strange Bookkeeping

Wells Fargo Bank, as the judge said, cooked up a bookkeeping system that turned "what ordinarily would be one overdraft into as many as ten overdrafts" says the judge's decision, ""and thereby dramatically multiplying the fees the bank can extract from a single mistake".

Transactions are usually posted in chronological order, but as demonstrated at trial by Heimann, the bank deducted the largest charges first. That drew down the available balance and triggered a higher number of overdraft fees.

"Most banks in the US do not do this," says Heimann, who speaks in a clear, logical and very expert way about the practice of manipulating overdraft fees. The megabanks on the other hand, that's a different story.

"Wells Fargo, the Bank of America, the Citibank, Chase, all these banks have been doing this for sometime," says Heimann.

Banks Collecting Billions in Overdraft fees

According to the research done by Leif, Cabraser, Heimann & Bernstein, banks in 2007 collected more than $17 billion in overdraft fees. And as Americans struggle to keep themselves in the black , the banks anticipated hauling in somewhere between $27 and $38.5 billion in overdraft fees in 2009 from their 50 million customers.

"Ongoing complaints from consumers and consumer organizations about the megabanks and their fancy manipulations to create fortunes in overdraft fees have gone unheard by regulators and legislators," says Heimann.

"It is in my view one of the many instances where the power of money speaks in terms of what corporate America can do to the little folks.

"We hear complaints all the time about class action suits but that is why the judicial system is so important. It levels the playing field for people who don't have the power that money brings in the political process. It is the place where they can seek redress and justice."

Software Detects Overdraft Fees

Wells Fargo reluctantly submitted its records for review and using a certain software, the law firm was able to identify all the overdraft charges collected. "Yes, that software would work to find out the same information at a different bank," says Heimann.

No wonder his phone is ringing off the hook.

Richard Heimann is partner with the firm of Lieff, Cabraser, Heimann & Bernstein. He is a graduate of Georgetown University (J.D., 1972). He is a former California district attorney and public defender. In private practice, Heimann has tried over 30 civil jury cases and won several nine figure verdicts for plaintiffs.