BBVA Compass is the latest bank to catch the ire of customers and attorneys because of overdraft fees.
In a lawsuit filed earlier this week, Houston-based restaurant company Fat Butter accused the bank of deceptive trade practices, claiming the bank posted debits out of the order they were made so it could increase overdraft fees.
For example, the lawsuit claims the bank pushed the largest debit through its account first, creating an overdraft, and then posted other smaller debits so a fee could be assessed for each transaction.
“It is spelled out in the lawsuit that the procedures the bank is following are to the detriment of the account holder,” said Marian Rosen, an attorney for Fat Butter.
Fat Butter filed the lawsuit, which is seeking class action status, in federal court in Houston.
Ed Bilek, a spokesman for BBVA Compass, said the bank's processes comply with all applicable laws. Transactions are posted on the date received by the bank, he said, noting that the order they're received may differ from the order the consumer actually made the transactions.
“You really can't do things in a chronological fashion, the technology just isn't there,” Bilek said. “But if you always have more funds than the transactions initiated, you don't run into a problem of fees.”
BBVA Compass, the U.S. operating arm of the Spanish banking giant Banco Bilbao Vizcaya Argentaria, has 85 branches Houston, including 27 recently acquired Guaranty Bank branches.
In Fat Butter's case, the business, according to the lawsuit, was charged more than $2,000 in fees because the bank allegedly reordered transactions to increase the number of fees charged.
In its contract with consumers, the bank discloses it may pay or charge items to accounts in any order, the suit says, but adds that the bank really always rearranges transactions from highest to lowest. Always reordering transactions is “abusive,” the litigation claims.
Lawmakers and regulators in recent months have criticized banks for trying to bolster profits by amping up fees, including those for overdrafts. Banks call such overdraft programs a courtesy, while consumer advocates say the fees force consumers to pony up billions without much choice.
Most banks introduced overdraft programs in 2001, according to federal regulators. About a quarter of banks nationwide process overdraft transactions by size, from largest to smallest, which can increase the number of overdrafts because the account gets overdrawn more quickly, according to a study by the Federal Deposit Insurance Corp. issued in December.
Federal lawmakers are considering legislation that would require banks to get permission from customers to allow overdrafts.
Earlier this week, Bank of America and Chase announced overhauls to how they charge such fees.
Bank of America said that starting Oct. 19, it will no longer charge overdraft fees if an account is overdrawn by less than $10 for one day. The bank also said it would make it easier to opt out of overdraft protection and cap the number of times it charges overdraft fees at four times.
Chase said it would eliminate overdraft protection for debit cards unless a customer opts in, post debit card transactions and ATM withdrawals in the order they occur, eliminate the fees if an account is $5 or less overdrawn, and cap the number of overdraft fees per day at three.
