BulletProofBlog the blog on crisis communications

In this regular feature, Bulletproof interviews top plaintiffs’ attorneys for their perspective on the crises likely to affect businesses in the near future. Today we talk to Robert C. Gilbert, a partner in Miami’s Alters, Boldt, Brown, Rash & Culmo, P.A. Mr. Gilbert is seeking class certification in the U.S. Southern District Court in Miami for multiple national cases against eight banks – including Bank of America, Wells Fargo, Citibank, JP Morgan Chase, and Wachovia – alleging unfair and improper assessment and collection of excessive overdraft fees.  

What is the current status of your effort to certify these cases?

Robert Gilbert: We are currently awaiting early motions by the defense, including a motion by some banks to refer the matter to arbitration.   Class certification proceedings will get underway as soon as we get past those motions.

We believe that the fact pattern of these cases, the massive number of people affected, and the whys and hows of the banks’ actions lend themselves ideally to class action treatment. You might say that class action litigation was invented for just these kinds of consumer claims.

What are the issues at the core of these cases? What links them together nationally, and in your class?

Robert Gilbert: The core issue involves the banks’ intentional manipulation of customer transactions to increase the number of overdrafts and, thus, the amount of overdraft fees that fall to the banks’ bottom lines. The banks do this by reordering customer transactions from largest to smallest dollar amount, rather than basing them chronologically on the date and time when customers actually use their ATM and debit cards. Their practice of reordering the charges increases the volume of smaller charges not covered, which means a greater volume of individual overdrafts, and the ensuing fees of around $35 each.

Behind these manipulations is the fundamental issue of full disclosure and transparency. Financial institutions often enroll customers in overdraft protection programs without telling them and won’t let them opt out later. It is the kind of heavy-handed practice that has created such a pandemic public trust problem for their industry.

It is also highly significant how technology supports these cases. Transactions are done through ATM machines. Bills are paid online. The banks know exactly when transactions are made, so there is no excuse for reordering them to suit their own purposes. They no longer have the excuse that a paper check was presented late.

So, among all the forces compelling transparency, add technology to the list.    

According to Moebs Services, an economic research firm, the banks will generate $38.5 billion in fees in 2009, up 22% from 2006. In light of such numbers, are you concerned that they might perceive the suits filed against them as an acceptable cost of doing business and that there will be no impetus for them to change at day’s end?

Robert Gilbert: The banks are fighting a two-front battle. On one front, we are aggressively seeking to redress past and current consumer grievances. We expect a significant recovery at day’s end.   On the other front, there is pending legislation aimed at curbing these abusive practices on a going-forward basis.   I expect that legislation will become law in 2010. Ultimately, the banks will be compelled to change as a result of our lawsuits and ongoing legislative efforts.

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Larry Smith is Senior Vice President of Levick Strategic Communications, the nation’s top crisis communications firm,  and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.