Fighting Chase Bank’s Overdraft Math
By Megan Varvais, Public Justice Communications Associate
In early 2009, I became one of many laid-off workers during the Great Recession. Unemployment meant I operated on razor-thin financial margins, never more than a few hundred dollars from disaster. Most of my purchases were small dollar items, things like five dollar Subway footlongs, or when I didn’t eat, a large cup of coffee. These were not extravagances, but thanks to Chase’s abusive overdraft policies, they devastated my finances as if they were.
Despite checking my balance frequently, as one does when they have less than $50 in their account most of the time, many of my small purchases would still unleash cascades of overdraft fees. Throughout 2009, I was charged over $1,100 in fees.
One morning, I realized I might have overdrafted while buying groceries. I logged into my account to find not one but three overdrafts, and this time, I could very clearly see that two of them should not have happened.
That was when I learned Chase routinely held several days of customers’ transactions, then hit their accounts with everything at once — but not in the order they had made the purchases. Chase reordered the transactions from largest to smallest, because it drained accounts faster and triggered an avalanche of fees. It was not by accident, and it was so pervasive there was a lawsuit. The court documents explained how Chase not only re-engineered customers’ purchases, but purposefully withheld accurate balance information.
After months of stress from so many fees, and seeing firsthand how my money had been manipulated in the exact way the lawsuit alleged, I contacted one of the law firms handling the case. An attorney in New York called me a few weeks later and asked if I would share bank statements with their forensic accountant. There was solid evidence of Chase’s abuse in my records.
One of the lowest moments in my adult life is when a Chase branch manager told me it was impossible for the bank to know if I had sufficient funds before authorizing a purchase, and thus could not remove overdraft “protection” from my account. I cried in frustration at their desk — in the bank lobby, on a weekday, in front of the other customers. Whether they knew it or not, that bank manager who watched me cry was lying. That moment is why I joined the lawsuit as a named plaintiff.
Chase attempted to throw our case out of court by dusting off some fine print in the take-it-or-leave-it paperwork everybody receives when they open an account (that non-negotiable fine print is sometimes known as a contract of adhesion). Buried in that document was a forced arbitration clause, which said that disputes like ours could not go through the legal system. The clause also banned us from pooling resources and fighting the bank together. Instead, we were to bring our cases individually before a private arbitrator hired by the bank.
You are more likely to be struck by lightning than win a dispute against a corporation in private arbitration. But as bleak as that is, it’s beside the point. The real point of forcing people into arbitration is that they won’t do it at all. For example, forensic accountants like the one who reviewed my bank statements charge $300–$500 an hour. Even though I lost hundreds to Chase’s junk fees, actually proving it would’ve cost hundreds more. The odds that I would have brought a case at all under these circumstances — let alone win — were basically zero.
If I had brought a case, what would have I won anyway? A few hundred dollars? Isolated, individual cases in private arbitration do not create lasting change by confronting the root causes of corporate abuse. A small number of people might win but the abusive policies that brought them there will just continue for everyone else.
We were able to keep our case within the civil justice system where it belonged. At the time, it could still be argued that an forced arbitration clause in a contract of adhesion was unconscionable.
Facing growing public outrage, the threat of regulatory action, and lawsuits like ours, the biggest banks changed their abusive overdraft policies. Transactions were applied to accounts in the order they occurred, balances were more accurate, and fees became less catastrophic. Customers regained control of their debit card transactions with the ability to opt out of overdraft “protection.” As a direct result of our legal action, Chase agreed to stop charging overdraft fees on debit purchases less than five dollars, and it returned $110 million to customers, which is likely a fraction of what it took.
In 2017, House Republicans tried to pass a law that would’ve effectively done away with class actions. By changing the rules for how and when class actions are brought, they could inflict a quiet death by procedure. One critical change would have required every single person in the class to suffer damages identical to the named plaintiffs’. Scouring the records of every potential class member would be prohibitively expensive (again, forensic accountants charge $300–$500 per hour). There were several other harmful rule changes in their bill but this one had the power to stop nearly every class action from being certified and moving forward. Much like forced arbitration, that’s the real goal: letting powerful corporations avoid ever having to answer for themselves in court, at the expense of regular people like us.
Large corporations like Chase do not change their behavior unless they have to. Class actions are one of the only ways consumers, workers, students, and others have the power to make that change.
