Citizens Bank's $137.5 million settlement of a class-action lawsuit that accuses it of improperly manipulating debit card transactions to boost overdraft fees has won preliminary approval from a federal judge in Florida.
As part of the settlement, Citizens, the No. 2 bank in the Pittsburgh region, will stop reordering debit card transactions from highest amount to lowest and instead process them in chronological order, according to documents filed in U.S. District Court in Miami.
The lawsuit claims Citizens and other big banks unfairly use computers to re-sequence customers' debit card purchases from high to low rather than posting them in the actual order they come in. The practice tends to drain an account more quickly and trigger the most overdraft fees.
Some 35 banks are involved in the suit, many of which have reached tentative settlements, including Pittsburgh market leader PNC Financial Services Group. PNC agreed in June to pay $90 million to settle the claims, details of which are pending court approval. Citizens, based in Rhode Island, reached its deal in April.
According to the court filing, Citizens will use the new posting method for at least three years. A final approval hearing is set for early March.
Technically, the bank could revert to the old way of processing debit card transactions at the end of three years, but as a practical matter that is unlikely, said Robert C. Gilbert with Grossman Roth in Miami, one of the attorneys prosecuting the case.
The Citizens settlement covers account holders who were hit with one or more overdraft fees as a result of high-to-low posting between Jan. 1, 2002, and Aug. 13, 2010. Customers who may be entitled to refunds will be mailed notices.businessnews - yourbiz
Patricia Sabatini: email@example.com or 412-263-3066.