Customer Rape - It's the Bank of America Way!

Let's say that on Monday morning, you have twenty dollars in your bank account. You use your debit card to buy a coffee in the morning for two dollars and then a sandwich in the afternoon for three dollars. And by the way, those prices are unrealistic, as everyone knows a cup of coffee costs around five dollars these days.

Anyway, you do the same thing on Tuesday and Wednesday, buying a cup of coffee and a sandwich. How much will you have left in your bank account come Thursday? Five dollars or negative two-hundred sixty-one dollars?

The answer is negative two-hundred sixty-one dollars. Why? Well, you forgot about a check that you wrote for twenty-one dollars, and that check appeared on your account just after midnight on Thursday morning. "But wait," you point out "that should only bring your balance to negative sixteen dollars plus a single overdraft fee," and in a logical world, you would be absolutely correct. Unfortunately, you're dealing with Bank of America in the real world.

Here's how it would work in a logical world

(overdraft in red)

How is this possible? Well, Bank of America, like most banks, registers pending transactions, and posts them in a batch every few days. Unlike many banks, Bank of America doesn't post those pending transactions in chronological order, they post them in order of monetary value from highest to lowest dollar amount, making it far more likely that an overdraft will occur sooner in the batch.

So on Thursday morning, instead of the check triggering a single overdraft, as you would expect, that check is the first item processed, immediately sending your account into overdraft and triggering an overdraft fee for every subsequent item.

Here's how it works in the world owned by Bank of America

(overdrafts in red)

So what should have been an ending balance of negative fifty-one dollars (negative sixteen minus a thirty-five dollar overdraft fee) instead becomes negative two-hundred sixty-one dollars because you're charged seven overdraft fees instead of one.

What's worse is that even if your paycheck goes through at exactly the same time on Thursday and you have sufficient funds to cover all pending items, you'll still be charged these overdraft fees because Bank of America will back-date posting of the twenty-one dollar check to Wednesday, even though it didn't appear on your account until Thursday at midnight.

Is this how banks should treat their customers?

Bank of America seems to think so because they've been doing this for years. They're almost proud of it, claiming in their automated response to my inquiries that their customers actually like their transactions to be processed in this way because it makes it easier for them to read their statements.

I'm a software engineer, and I know a little something about how software is written. The way that something is displayed to the user and how it is stored and processed behind the scenes are two entirely different things. So when Bank of America tries to use the excuse that people like being raped, I immediately have to call 'bullshit!'

This year, a class action lawsuit was filed and won against Bank of America for this very practice. BofA settled, unwilling to admit any wrongdoing, and will be giving everyone who responded a check for seventy-eight dollars. (Didn't you get the memo? I certainly didn't) Yet they continue the practice to this day. Why? The answer is quite simple, because they make far more money raping people with artificial overdraft fees than they could ever lose in court settlements.

The economy is bad right now, and people are hurting, including me. Banks got bailout money from the government whereas the American public did not. For Bank of America to now turn around after taking forty-five billion in TARP funds (taxpayer dollars) and gouge us for even more money with these practices is completely unacceptable.

As the victim of this practice, I threatened to leave Bank of America as a customer as well as take legal action predicated on knowledge of their class action settlement and got yet another automated response that they wouldn't be reversing the charges. I'll be leaving Bank of America at the end of the month, and I suggest you do the same.

(NOTE: I'm told that several other banks do this as well, including Wells Fargo and Chase, but I can't confirm that information)