Woodforest Bank has agreed to refund more than $12 million to consumers who were charged high overdraft fees on bank accounts. In addition, the bank will pay a $400,000 penalty to the federal Office of Thrift Supervision (OTS). It’s the toughest penalty ever imposed by OTS regarding overdraft fees, as a debate over the fees heats up. Woodforest will repay current and former customers “who were misled about the cost of overdraft protection and charged excessive overdraft-protection fees.” Woodforest’s business relied “upon an unreasonably high level of aggregate fees,” according to OTS.
The 169-unit savings bank has 35 offices in Alabama Wal-Mart stores. The savings bank’s owner, Woodforest Financial Group of Woodlands, Texas, also owns the 577-unit Woodforest National Bank. Existing and former depositors charged overdraft fees since January 2, 2008, will get refunds. Under the order, the bank must repay eligible customers by June 23rd. Customers seeking more information can call 1-877-968-7962.
Consumer advocates have been pushing for federal action to cap bank charges for a long time. Customers overdraw accounts by $20 on average but are charged higher fees, according to Jean Ann Fox of the Consumer Federation of America. She added: “They can charge astronomical interest rates for short-term cash advances, and they don’t have to quote the (rate).” Wal-Mart shoppers fit the profile of banking customers most likely to get caught in a spiral of overdraft charges (low- to moderate-income, female-headed households). It should be safe for low-balance consumers to have a bank account, according to Ms. Fox. I agree with that assessment.