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Court approves overdraft fee settlement for TD Bank, Citizens Financial

The outside of a TD Bank branch is seen in New York January 17, 2012.

SHANNON STAPLETON/REUTERS

Two large banks have won initial U.S. court approval to pay a combined $199.5-million (U.S.) to settle class-action lawsuits accusing them of imposing excessive overdraft fees on chequing account customers.

Royal Bank of Scotland Group PLC's Citizens Financial unit will pay $137.5-million, and Toronto Dominion Bank will pay $62-million under their respective settlements, which won preliminary approval on Wednesday by U.S. District Judge James Lawrence King in Miami.

Judge King oversees nationwide litigation against 35 lenders over the fees, which are assessed when customers overdraw their checking accounts.

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The lawsuits alleged that banks charged the fees, typically $25 or $35, faster and more often by processing transactions from largest to smallest, rather than chronologically.

Fourteen lenders have settled, lawyers for the customers have said. Bank of America Corp's $410-million settlement is the largest, and Citizens' is the second-largest.

Citigroup Inc. and Wells Fargo & Co. are among the larger banks that have not settled.

In 2010, the U.S. Federal Reserve barred banks from charging overdraft fees on electronic and debit card transactions without advance customer approval. The customer litigation concerns alleged practices that predated the Fed action.

Judge King scheduled hearings for March 7 to consider final approval for the Citizens and TD Bank settlements.

The case is In re: Checking Account Overdraft Litigation, U.S. District Court, Southern District of Florida, No. 09-md-02036.

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