Show me the money

Citizens Financial Group, a bank based in Rhode Island, was accused of unfair business practices in its calculation of overdraft fees for its poorer customers.  Instead of processing transactions in the chronological order they were created, the bank elected to process them from largest to smallest.  This increased the likeliness and amount of overdraft fees, which are levied when a customer spends more money than he/she has in the bank.

So, to make this clear, assume that I have $500 in my account, and perform five transactions for $5, $10, $20, $101, and $400 in that order.  If processed chronologically, I would be charged only one overdraft fee on the $400 transaction, since that is the transaction that actually overdraws my account.  Using Citizens Bank’s method processes the money in reverse order, meaning my account would overdraw on the $101 transaction.  The next three transactions — $5, $10, and $20 — would each create a new overdraft fee, for a total of four.  Overdraft fees typically being between $25-$35 each, this creates a difference of $75-$105 between the two practices in our imaginary example — quite a lot of money for someone with only $500 in the way of life savings.

Citizens Bank was essentially capitalizing on poorer customers, who don’t have that much money to store in a bank account and are therefore way more likely to overdraw in the first place.  In other words, the bank changed its practices to kick them when they’re already down and bloodied and screaming for them to stop.

Well, the good news is that they did stop, eventually, and when ordered to by a judge.  Today, the bank agreed to pay $137.5 million to settle its lawsuits related to this practice.  They join such esteemed evil bankers as Bank of America and JPMorgan, who recently paid $410 million and $110 million in similar settlements, respectively.  Though Citizens admits to no wrongdoing in this clearly wrong business practice that they were doing, the money ends the case and brings at least some light to the customers’ lives they darkened.