On Dec. 19, 2016, a federal district court judge for the Southern District of California denied Bank of America’s request to dismiss a putative class action over a fee charged by Bank of America in relation to overdrafts by its deposit accountholders.
The fee in question is an incremental $35 charge to an accountholder in the event her balance goes negative and is not restored within five days. The $35 fee is assessed by Bank of America in addition to an initial overdraft charge for the overdraft transaction. At issue in the case is whether the incremental $35 fee is an authorized service charge for the deposit account, as Bank of America contends, or interest on an extension of credit in excess of the maximum interest rate allowed under the National Banking Act, as the plaintiffs contend.
In denying Bank of America’s motion to dismiss the case, the district court has tacitly indicated that it views the flat fee imposed by Bank of America when an accountholder does not restore a negative balance within five days as an interest charge in connection with an extension of credit. The case may have implications for issuers charging similar fees in relation to their deposit accounts.
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