Magazine article American Banker

California Banks Win an Appeal in Fee Suit

Magazine article American Banker

California Banks Win an Appeal in Fee Suit

Article excerpt

California banks are celebrating a victory in a lawsuit that threatened to open them up to continuing litigation over bounced check fees.

The suit by the California Grocers Association of Sacramento contended that San Francisco-based Bank of America profiting unfairly from fees billed to depositors of checks that bounce.

In 1991, a county court in Oakland agreed with the grocers and ordered Bank of America to cut the fees nearly in half, and to pay the plaintiff s attorney $2 million for expenses.

But earlier this month, a state appeals court overturned the decision, marking a big victory for bankers who feared an onslaught of litigation if the appeal failed.

"We think the decision is laudable," said Tom Celebrezze, a spokesman for the California Bankers Association in San Francisco.

Fees Called Excessive

The association of 8,000 grocery and convenience stores filed the suit as one measure to to reduce what members believe are excessive fees charged for many bank services, said Don C. Beaver, president of the trade group.

"We're concerned about all banking fees," Mr. Beaver said. "We think they're abnormally high."

The reason for the high fees is that "there is no competition in banking in California," Mr. Beaver said.

In this case, the association argued that it was unfair for Bank of America to charge $3 for each check returned to a depositor for insufficient funds, because the bank's expenses for sorting these checks are less than a dollar.

Consumer Statute

Furthermore, the fees are unfair since banks collect more than 15 times their processing costs from fees charged to people who write checks that bounce, Mr. Beaver said.

The suit employed a California statue that allows consumers to sue for reduction of fees that are deemed to be "unconscionably" high.

The Oakland court agreed with the grocers that $3 was too much to charge, and ordered Bank of America to reduce its fees to depositors to $1. …

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