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BofA fee ruling to be reviewed

March 22, 2007|From Bloomberg News

The California Supreme Court on Wednesday agreed to review a ruling reversing a damage award worth as much as $1.6 billion against Bank of America Corp. for overdraft fees on accounts that received direct Social Security benefit deposits.

The San Francisco-based court granted without comment a petition by the plaintiffs to rehear a November appeals court ruling that favored the bank, the second-biggest U.S. lender by assets.

A trial court, which ruled that fee deductions from accounts receiving government benefits are barred in California, ordered Bank of America in 2004 to pay customers $296.6 million in compensatory damages.

Under that decision, $1.3 billion more in payments may be owed because the ruling called for $1,000 in damages for emotional and economic harm to as many as 1.3 million customers, lawyers for the customers said.

"The decision by the California Supreme Court to review this case is not a decision on the merits," Bank of America spokeswoman Shirley Norton said. "The unanimous decision of the Court of Appeal that the bank's practices at issue do not violate California law is correct and should be affirmed."

The trial court said fee deductions were barred to protect retirement benefits and that the bank misrepresented to customers that it had the right to assess penalties on their accounts.

A San Francisco appeals court reversed that decision, saying a rule cited by the trial court doesn't apply to Bank of America.

The customers asked the California Supreme Court to rehear the case.

The case stemmed from a complaint filed by Paul Miller, a customer who said the bank took bounced-check fees from an account in which his benefits were directly deposited. The bank notified customers in writing that such fees can be automatically deducted from their accounts.

San Francisco Superior Court Judge Anne Bouliane ruled in 2004 that customers weren't told the fees could be applied to Social Security money.

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