Bank of America 1, Retirees 0.
In 2004, Bank of America was ordered to pay $284 million to 1 million customers in a settlement. The bank was charged with using funds from social security or other government benefits in customers’ accounts to cover bounced check fees. The California Supreme Court overturned this ruling yesterday.
Federal law indicates that creditors are not permitted to seize government benefits to pay for debt. The bank’s argument is that fees charged to a bank account are not debt. The fees are debits like any other withdrawals and government checks are credits like any other deposits. According to the law in California, bank accounts tally debits and credits.
The balance of a savings or checking account is a running tally. If a bank charges a fee, the balance is reduced by the amount of a fee, even if the reduction forces the balance to dip below zero. The next deposit would increase that balance, regardless of the source of the deposit, government or otherwise. How would a bank account logistically not apply any deposit to offset a fee?