Bank of America lawsuit thrown out by California Supreme Court

A billion-dollar class-action verdict against Bank of America was thrown out by the California Supreme Court today on the grounds that the bank’s charges did not violate state law.

Consumers sued the bank for taking overdraft charges and other fees from accounts that contained government benefit money. A jury found in 2004 that the bank violated a consumer law by falsely claiming it had the right to use Social Security money and other government funds to cover overdrafts and insufficient-fund fees.

The suit was based on a 1974 state high court ruling that said a bank could not recover money to pay a credit card debt from an account set up to receive public benefit money. But the court said the 1974 ruling did not apply to the facts alleged in the Bank of America case, and it further cited a state law that it said permitted banks to take fees from accounts containing government benefit money.

"Bank of America’s practice of recouping overdrafts and charging insufficient funds fees is permissible in light of the Legislature’s unequivocal statement … that overdrafts and bank charges are not debts " and not subject to rules involving accounts containing government money, Justice Carlos R. Moreno wrote for a unanimous court.

— Maura Dolan