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Excessive Overdraft Claims Will Go to Jury

(CN) - A jury should determine whether Umpqua Bank fraudulently maximizes its ability to charge customers overdraft fees, a federal judge has ruled.

Lead plaintiff Amber Hawthorne filed the federal class action against Umpqua in December 2011, alleging the bank employs sophisticated software that "maximizes the number of overdrafts, and thus, the amount of overdraft fees charged per customer."

Hawthorne also called Umpqua's account agreement misleading and said the bank "provides inaccurate balance information to its customers through its electronic network," informing them "that they have a positive balance when, in reality, they have a negative balance, despite the bank's actual knowledge of outstanding debits and transactions."

The complaint alleges breach of contract, bad faith, unconscionability, conversion, unjust enrichment, and violations of the California Unfair Competition Law (UCL) and the Consumer Legal Remedies Act (CLRA).

Umpqua moved to dismiss in April 2012, prompting a tentative ruling from U.S. District Judge Yvonne Gonzalez Rogers that granted and denied the motion in part. Rogers subsequently entered the tentative ruling as an order by stipulation of the parties. She dismissed the unfairness prong of the UCL and unconscionability claims, but sustained the fraudulent prong of the UCL and conversion claims.

The class then filed a second amendment complaint, and Umpqua moved for judgment on the pleadings.

U.S. District Judge Jon Tigar agreed on Oct. 25 to dismiss with prejudice the claims "for violation of the 'unfair' prong of the UCL, breach of the implied covenant of good faith and fair dealing, breach of contract, and unjust enrichment."

Tigar denied Umpqua's motion in all other respects.

"Strangely, Umpqua argues ... that plaintiffs fail adequately to allege 'that they deposited funds with Umpqua which were used to pay overdraft fees," Tigar explained in his ruling. "But the SAC expressly alleges just that: 'Umpqua has wrongfully collected overdraft fees from plaintiffs and the members of the national class, and has taken specific and readily identifiable funds from their accounts in payment of these fees in order to satisfy them."

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