Bank of America faces a lawsuit about its overdraft fee relief program it offered during the pandemic

When the pandemic was still in full swing in March of 2020, Bank of America launched a “Client Assistance Program”  which promised to enable customers to request a refund for overdraft fees, non-sufficient funds fees, early withdrawal penalties for certificates of deposit, and monthly maintenance fees. The firm stated then that it would decide to refund on a case-by-case basis. 

The news: In its announcement, the bank stated that the program was meant to offer relief to its customers during the pandemic, similar to measures taken by the firm during other difficult periods like natural disasters and government shutdowns. 

Three years later, the bank is now facing a lawsuit which claims that the firm made false promises in regards to the relief program. 

Relief or the lack thereof: The current case is a revival of a filing that was at first dismissed by judge Yvonne Gonzalez Rogers of the US District Court for the Northern District of California in 2022. But this time Rogers has ruled that the plaintiffs have plausibly argued that the bank misled customers on its website and mobile app, and led them to believe that they could access relief, even though the bank had quietly sunsetted the program in August of 2020. 

However, BofA continued to advertise the existence of the relief program after this date:

• At least until October 29, 2020, BofA’s website showed text that led people to believe the program was still running.
  
• In its “Coronavirus Fact Sheet” issued on October 8th of the same year, BofA again claimed the existence of the program.
  
• A full year after the end of the relief program, customers continued to be redirected to the relief program through the bank’s mobile app. 

One of the lead plaintiffs in the case, Anthony Ramirez of California, a truck driver, accrued $245 in fees when he overdrew his account in August 2021. By that time, the firm had already shuttered the program for one year, but the misleading redirection to the relief program inhibited Ramirez from taking on “less costly steps”, according to the suit. 

Another plaintiff claims that he considered canceling automatic payments that were scheduled to be withdrawn from his account but did not do so due to the promises made by the relief program. 

One critical issue at the heart of the lawsuit is that BofA did not formally disclose that it was ending its Client Assistance Program, the effect of which was compounded by the redirection to the relief program website. 

Context: At a time when the CFPB is on a war against junk fees, the case is a poignant example of how exacting overdraft fees and related policies and actions can prove to be for customers. 
As many banks are now cutting back on overdraft fees, the decrease in fees comes after a long period when they were rising dramatically. Now most banks compete on offering the most consumer-friendly overdraft-related products and services, which has played its part in driving down the average overdraft fee in the country.

These changes, albeit new, have also been acknowledged by the CFPB’s Director Chopra who stated that “we are very gratified that this industry seems like it’s competing again on [overdraft]…This has been a healthy move,” in 2023.

While the CFPB’s current proposal on overdraft fees and the changes made by some of the biggest banks in the country will go a long way in ensuring consumers’ financial wellbeing, what they can’t do is correct errors of the past. 

As the data shows, when BofA launched its Client Assistance Program in 2020, the industry average of overdraft fees was the highest it has been in recent memory. Due to the alleged misleading claims by the firm, customers at the time believed it was better to incur the $35 overdraft fee than look for alternatives. 

Industry groups claim that the CFPB’s current proposal on overdraft fee is “a solution in search of a problem as it seeks to solve a market problem that simply does not exist”. But, cases like this one show that while this problem may or may not exist at the moment, it definitely existed before. 

Moreover, this is a problem that may directly impact how banks do business. 

Not just because the current proposal by the CFPB may “stifle competition” as industry groups put it, but also because data as recent as this year’s shows that customers’ levels of trust in their FIs have been declining consecutively for two years due to unexpected fees.