On November 7, 2011, a federal judge gave final approval to a $410 million settlement in a class-action lawsuit affecting more than 13 million Bank of America customers who had debit card overdrafts during the past decade. The settlement became final a week after Charlotte, N.C.-based Bank of America backed off a plan to charge a $5 monthly fee for debit-card purchases. The outcry prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel trial tests of their own debit card fees.
1. Although the judge awarded $410 Million in the suit, what percentage did Barry Himmelstein, an attorney for customers, anticipate was the actual amount collected by Bank of America for the overdrafts?
2. Explain how the suit claimed that Bank of America maximized these fees. Give an example that includes 5 overdraft incidences.
3. Make the journal entry for Bank of America for the settlement, including amounts to be paid to the class-action lawyers.
Associated Press Staff (2011). Judge Approves $410 Million Settlement of Lawsuit Against Bank of America On Overdraft Fees, Nov. 7 (Retrievable online at http://www.washingtonpost.com/national/judge-mulling-over-410-million-settlement-in-bank-of-america-overdraft-lawsuit/2011/11/07/gIQACKjZuM_story.html)
Youtube video (2011). Bank of America Agrees in Overdraft Fee Lawsuit to Pay $410 Million (Retrievable online at http://www.youtube.com/watch?feature=player_embedded&v=1Ov6QBMStt8)