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April 26, 2012

Citizens agrees to $137.5 million in overdraft suit

April 27, 2012– Citizens Bank of Providence, R.I., has agreed to a $137.5 million settlement in a lawsuit over its ordering of check payments to maximize overdraft fees, reports said.

The suit is part of a class action targeting more than 30 banks, and the Citizens' settlement is the second-largest after the settlement last year by Bank of America, which agreed to pay $410 million. That settlement was approved last May. J.P. Morgan Chase, New York, agreed to pay $110 million in February.

Citizens is a unit of Royal Bank of Scotland Group.

This class action, initiated in 2009, is proceeding at the same time the Consumer Financial Protection Bureau is moving forward with its own inquiries regarding overdraft protection programs and the use of pre-dispute arbitration clauses.

Reuters quoted a plaintiffs' attorney stating that some banks still in litigation regarding overdraft fees included arbitration measures in deposit agreements with customers.

Carrie Hunt, NAFCU's general counsel and vice president of regulatory affairs, said the association is watching this litigation for any potential impact on overdraft regulation.

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