Pinnacle’s overdraft fees spur lawsuit

A Pinnacle Bank customer who alleges the bank manipulated overdraft charges to maximize the amount of fees collected is taking legal action to refund his and all Pinnacle customers’ overdraft charges over the past several years.

The bank reordered transactions to process the largest ones first, instead of charging customers in chronological order, which, in turn, hastened the depletion of customer accounts and triggered more overdraft fees, according to the action filed recently in Davidson County Circuit Court.

The case will be heard by Circuit Court Judge Joe Binkley in 5th Circuit Court.

The bank automatically enrolled customers in a program that would let debit card purchases go through when customer accounts were empty, prompting a $36 fee for each purchase after a customer’s money ran out.

Since new banking regulations passed in July 2010, however, banks, including Pinnacle, must give customers the option of opting in to overdraft protection programs. Pinnacle has named its program “Overdraft Privilege.”

“In many instances, these overdraft fees cost Pinnacle account holders hundreds of dollars in a matter of days, or even hours, when they may be overdrawn by only a few dollars,” according to the suit.

A similar lawsuit was settled in federal court late last month in which the Green Bay, Wis.-based Associated Bank agreed to pay $13 million to customers who were illegally charged excessive overdraft fees.

Furthermore, a federal judge gave final approval last month to a $410 million settlement in a class-action lawsuit, making more than 13 million Bank of America customers eligible to recoup some of their overdraft fees.

The suit is now awaiting for a legal response from Pinnacle and then would need a state judge to declare the filing a class-action case to continue.

Bank defends practice

In a statement, Pinnacle said that it has “followed the practice of other banks” in regard to overdraft fees and that all of the bank’s agreements have been “disclosed openly and are regularly reviewed by auditors.”

Attorney Todd Carpenter with a Phoenix-based firm is representing Pinnacle customer John Higgins of Nashville.

Carpenter said his firm, Bonnett, Fairbourn, Friedman Balint P.C., is pursuing a similar action against First Tennessee Bank.

Pinnacle’s Kim Jenny, risk and performance officer, said the charges are part of a trend of law firms trying to capitalize on long-held bank practices in the wake of new federal banking regulations.

“It appears to be a topic we’re seeing more law firms trying to generate more traffic from,” Jenny said, later saying by email: “I’m certainly prepared to defend our program as being fair, compliant and one that offers a valuable service to the clients that choose to use it.”

About 90 percent of overdraft fees are paid by the poorest 10 percent of banks’ customer base, according to a study by Moebs Services, a research company that does government studies.

“Almost by definition, these fees disproportionately affect the poor, who are most likely to maintain low balances,” according to the suit.

Banks across the country have increased revenue from overdraft fees every year since 1992, according to Moebs’ research.

Article source: http://www.tennessean.com/article/20111216/BUSINESS01/312160059/2047/BUSINESS