Short-Lived Restitution Reprieve for Wells Fargo

     (CN) – A federal judge slapped Wells Fargo with a $203 million restitution order and a new injunction in a class action over “high-to-low” debit posting.
     After paying hundreds of dollars in fees on relatively small overdrafts, lead plaintiffs Veronica Gutierrez and Erin Walker sued Wells Fargo to get their money back and stop the “high-to-low” practice, which the bank started in California more than a decade ago. The bookkeeping method processes account debits in the order of the highest amount to the lowest, emptying customer accounts by multiplying overdraft fees that the bank then collects in the billions of dollars.
     U.S. District Judge William Alsup had previously ruled against Wells Fargo on several issues after a two-week bench trial on the issue in San Francisco. He found that the bank had acted in bad faith and violated several prongs of the California Business and Professions Code. The court ordered the bank to stop using the high-to-low method and to pay back some $203 million in overdraft fees.
     A three-judge panel of the 9th Circuit reversed most of that decision late last year, and vacated the injunction and the restitution order.
     The federal appeals court found that federal banking law pre-empted most of the claims. It was not an entire loss for the class, however, as the appeals court affirmed that Wells Fargo had made misleading statements to consumers regarding the accounting method, and had engaged in deceptive and false advertising.
     On remand to District Court, the plaintiffs moved for a new injunction and restitution award based on the two claims upheld on appeal.
     Alsup reinstated the restitution order on Tuesday and permanently enjoined the bank from misleading customers about its posting-order practices.
     “This order agrees that the injunction and restitution order should be reinstated and re-anchored solely in the fraudulent affirmative misrepresentation,” Alsup wrote.
     Wells Fargo claimed unsuccessfully that the plaintiffs had waived the restitution issue. The bank also argued that the injunction was unnecessary because it has already stopped using the high-to-low method, but Alsup found that without one the bank could “return to its prior practice of misleading customers.”

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