Thank Bank of America for a whole new definition of surge pricing.
In a class-action case, the bank was accused of charging unwarranted overdraft fees to customers taking Uber rides with too little cash in their accounts, a violation of BofA’s terms. As plaintiffs allege, the charges had the effect of multiplying more than fivefold the cost of a short $8 Uber ride.
The bank “breached its contractual promises,” the lawsuit states, by assessing overdraft charges on one-off purchases that were wrongly classified as “recurring,” and thus liable to incur charges.
It’s not the first time BofA has come under scrutiny for its overdraft practices. In January, the bank agreed to pony up $27.5 million in order to settle a class-action lawsuit concerning overdraft fees being wrongfully charged to some 3 million customers. The settlement came nearly six years after the bank announced, to minor fanfare, that it would reclassify the way it charges overdraft fees on retail accounts
But overdraft issues persist, according to the suit, Pantelyat v. Bank of America.
The issue comes down to how BofA classifies different types of debits: recurring and non-recurring. For recurring charges, like gym memberships and rent payments, BofA’s terms allow the bank to charge fees when accounts are overdrawn. But for ordinary one-off charges like cab rides or groceries, the bank promises to simply decline purchases that would put account balances in the red.
As then-BofA executive Susan Faulkner said of the policy in 2010, “Our customers have been clear that they want to know if a purchase is going to overdraw their account.”
But if the lawsuit is any indication, the same kind of overdraft fees that raised hackles before the reforms are still hitting customers.
On March 4, 2016, Pantelyat’s account balance sat at just $3.44. Still, she ended up taking two Uber rides, the first costing $10, the second $7.67. These were one-time, non-recurring purchases – the sort that aren’t supposed to trigger fees.
Yet BofA hit her with two $35 overdraft charges, turning the $18 in Uber rides into $88 combined.
“Bank of America has systematically authorized overdrafts on everyday non-recurring debit card transactions and has charged a $35 overdraft fee for each transaction,” the lawsuit states. “Bank of America authorizes these misclassified transactions in order to maximize its overdraft fee revenue.”
It’s not clear that BofA really engineered the charges in the way the lawsuit claims, or simply saw the plaintiff’s Uber rides happening on such a regular basis as to assume they were recurring charges. Though overdraft fees have come down in recent years, they still contribute a healthy profit margin for major banks, totaling $6 billion last year between the nation's three biggest lenders – BofA, JPMorgan Chase, and Wells Fargo.
A consumer banking representative at Bank of America did not respond to a request for comment.
Debit spendthrifts: Don’t let your accounts dwindle to zero. But if you can’t help it, stay away from Uber.