A New York bank was unable to dodge a lawsuit accusing it of violations of state consumer protection law in the way it ordered customer transactions.

What happened

Josefina Valle and her son Wilfredo filed suit against the bank in November 2012, accusing it of engaging in a host of deceptive practices. After some pretrial wrangling, the trial court narrowed the dispute down to a single count under New York’s General Business Law Section 349 based on the alleged reordering of ATM transactions to maximize overdraft charges.

The bank moved to dismiss the suit, arguing that its actions did not violate the state law and that state banking regulations provide discretion to process transactions in the order selected by the bank. The trial court disagreed, denying the motion in February 2016, although it agreed with the bank that certain transactions cited by the Valles fell outside the applicable statute of limitations.

On appeal, a five-member panel unanimously affirmed.

“The complaint states a claim under General Business Law Section 349 by alleging that defendant employed a deceptive and misleading consumer-oriented policy, not disclosed to plaintiff, of high-to-low reordering of ATM transactions that resulted in plaintiffs’ being charged an additional overdraft fee on April 18, 2012,” the court wrote.

Finding the defendant’s contentions “unavailing,” the court found the plaintiffs backed up their claims with contentions about the bank’s inadequate balance information.

“The claim is also properly supported by allegations that defendant provided plaintiffs with inaccurate balance information, often showing a positive balance when in fact their account balance was negative, and failed to provide real-time notice that a given transaction would overdraw the account, despite the feasibility of doing so, and that these practices also resulted in additional overdraft fees,” the panel said.

To read the opinion, click here.

Why it matters

Providing an important lesson for banks, the appeals court wasted little ink on the dispute but did manage to make clear that the plaintiffs’ allegations of transaction reordering were strengthened by additional allegations of the bank’s inaccurate balance information, such as showing a positive balance when it was actually negative and failing to provide notice in real time that a transaction would overdraw the account.