Bank of America Settlement

Recently a judge ordered Bank of America to pay a $410 million settlement to customers for overdraft fees.  Two things about this story are interesting, but not emphasized as I think they should be.

Let’s look more closely at the numbers.  One lawyer claims that BoA collected over $4.5 billion in fees but was fined less than 10% of that.  He says that 13.2 million customers will receive an average settlement of $27.  So that’s $356.4 million to the 13.2 million customers at $27 each (big deal!), $53.6 million left over for the lawyers, and the bank gets to keep most of what it collected – not a bad deal for the bank, a good deal for the lawyers and a pittance for everyone else.  Later in the article it mentions that the lawyers got even more, $123 million, but those numbers don’t add up.  If they are correct, it would be even less for the customers.  (I have never been a BoA customer so have no particular ax to grind.)

The customers' objection was to how the bank calculated overdraft fees to maximize their revenue  But remember where those overdraft fees came from – people who cashed checks or used debit cards when they didn’t have enough money in their accounts.  This is third grade math, addition and subtraction.  Sure the bank may have been sleazy in the way they calculated the fees, but there would not have been any fees to calculate had their customers not made the overdrafts in the first place.  It all gets back to individual behavior.  Where would the bank and lawyers be, if the customers added and subtracted correctly?  Where would the customers be, for that matter - $4.5 billion richer?