Following a two-week bench trial, a federal judge has ordered Wells Fargo Bank, N.A. (the “Bank”) to pay its customers $203 million in restitution for its practice of resequencing posted debit card transactions from highest to lowest dollar amounts, which the court found was an “unfair” and “fraudulent” practice under California consumer protection laws. The court also issued injunctive relief requiring the Bank to cease engaging in resequencing practices by November 30, 2010. See Gutierrez v. Wells Fargo Bank, N.A., No. C. 07‑05923 (N.D. Cal. Aug. 10, 2010).
In its defense, the Bank asserted that the practice of paying high dollar amount debit card transactions before those of lower amounts is intended to benefit customers by providing for the payment of high priority purchases before other purchases. According to the court, however, this computerized practice was intended to maximize revenue generated from overdraft transactions by depleting customer account balances more quickly than if debit transactions were deducted from accounts in the order in which they occurred. The court further found that the Bank’s resequencing practices, as well as its practice of approving overdraft transactions without point-of-sale notices, were not adequately disclosed to its customers and were contrary to “good faith” requirements under California law. The court also determined that the California consumer protection laws on which the plaintiffs relied to contest the Bank’s resequencing practices do not impermissibly interfere with the business of banking or conflict with federal laws governing national bank fees. Accordingly, the court rejected the Bank’s assertion that the National Bank Act and OCC regulations preempt the California consumer protections laws.