Class action alleges Capital One rearranges transactions to charge more overdraft fees

By Michelle Massey | Jun 2, 2010

Kanner NEW ORLEANS-A recently filed class action accuses Capital One of unfair and unconscionable acts in order to collect excessive overdraft fees.


NEW ORLEANS-A recently filed class action accuses Capital One of unfair and unconscionable acts in order to collect excessive overdraft fees.

The lawsuit claims that Capital One rearranges and manipulates the order of a customer's transactions in order to collect more overdraft fees.

Individually and on behalf of all others similarly situated, Leanne Steen filed the class action against Capital One Financial Corp. and Capital One Bank (USA) on May 18 in the federal court in New Orleans.

The proposed class will include all Capital Once customers in the United States who incurred an overdraft fee as a result of Capital One's practice of re-sequencing debit card transactions from highest to lowest.

In the lawsuit, Steen states that instead of Capital One simply declining debit transactions when there are insufficient funds or warning its customers that an overdraft fee will be assessed, it processes the transaction and then charges the customer a $35 overdraft fee for each transaction.

Further, the lawsuit accuses the bank of failing to adequately disclose that customers can opt out of overdraft protection. In a further effort to "generate obscene profits," Capital One manipulates and alters customers' transaction records to maximize overdraft penalties imposed on customers, Steen argues.

"Capital One enforces an unconscionable policy whereby charges incurred are posted to customers' accounts in a non-chronological order, from highest to lowest, and are held for multiple days and then batched together, to maximize the number of overdraft transactions and fees," the lawsuit states.

According to the complaint, if a customer, whose account has a $100 balance at the time Capital One processed several transactions, made four transactions of $20 and one subsequent transaction of $150 on the same day, Capital One would reorder the transactions from largest to smallest, imposing four overdraft fees on the customer.

If the larger $150 transaction were debited last – consistent with the real order of the transactions – only one overdraft fee would be charged, the suit states.

Causes of action filed against Capital One include breach of contract, breach of the good faith and fair dealing, unconscionability, conversion, unjust enrichment and violations of state unfair trade practice laws.

On behalf of the proposed class, Steen is seeking restitution of all overdraft fees paid to Capital One, disgorgement of the ill-gotten gains, punitive and exemplary damages, statutory damages, pre-judgment interest, court costs and attorneys' fees.

According to the lawsuit, in 2009 banks collected an estimated $27 billion to $38.5 billion in overdraft charges alone. The fees disproportionally affect lower income individuals, who are more likely to maintain low balances, the suit claims.

Attorneys M. Ryan Casey, Allan Kanner and Conlee S. Whiteley of Kanner & Whiteley in New Orleans; Richard M. Golomb, Ruben Honik, and Kenneth Grunfeld in Philadelphia; and Andrew Bizer of The Bizer Law Firm in New Orleans are representing the proposed class of plaintiffs.

Jury trial demanded.

U.S. District Judge Jay C. Zainey is assigned to the litigation.

Case No. 2:10cv01505

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