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First Merchants Bank accused of overdraft fee violations

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A lawsuit alleges that Muncie-based First Merchants Bank manipulated the timing of customers’ transactions to cause their checking accounts to bounce more frequently, generating millions of dollars in overdraft fees.

The suit, which seeks class-action status, was transferred May 23 to U.S. District Court for the Southern District of Indiana.

Plaintiff Brenda Lear, of Trafalgar, originally filed the suit last month in Delaware Circuit Court.  But attorneys for First Merchants filed to transfer the case to federal court in Indianapolis, saying some of the customers also reside in Ohio and that the amount of money at issue likely exceeds $5 million.

The lawsuit seeks unspecified dollar damages for “thousands” of First Merchants customers. The bank has branches in two dozen Indiana counties, and employs about 275 people at numerous locations in the Indianapolis metro area.

The suit alleges the bank, using sophisticated software, reordered electronic debit transactions from highest-to-lowest dollar amounts, and processed debits before credits to deplete a customer’s available funds “as quickly as possible.”

Customers paid a $35 fee for each overdraft.

The suit says the bank sought to maximize the number of overdraft fees, as well. It cites, as an example, a customer who had an account balance of $100 and made four debit transactions during one day, of $10, $10, $10 and $95.

If processed in order of when the debits were made, the $95 charge would have been made against a $70 balance, resulting in a single overdraft fee. But Lear alleges the bank’s software would read the $95 transaction first and each $10 transaction thereafter — resulting in three total overdraft fees.

The complaint also alleges First Merchants manipulated transactions so that many customers’ accounts were not actually overdrawn, “either at the time of the debit transaction or at the time the overdraft fees were charged.”

“This automatic, fee-based overdraft scheme was intentionally designed to maximize overdraft fee revenue for FMB,” states the complaint.

Neither First Merchants nor its attorneys at Bingham Greenebaum Doll could be reached for comment.

Banks have been coming under more scrutiny regarding overdraft fees. Earlier this year, Wells Fargo was ordered to pay $203 million to settle class-action litigation accusing it of imposing excessive fees. In a separate case, Bank of America Corp. paid $410 million and JP Morgan Chase paid $210 million to settle similar litigation.

Nationwide, banks collected $32 billion in overdraft charges in 2012, according to Moebs Services. The suit points to Federal Deposition Insurance Corp. data that for the typical bank, overdraft fees amount to 74 percent of total service charges on deposit accounts.

Lear’s local counsel is Kathleen Farinas of Indianapolis-based law firm George & Farinas LLP. Also representing Lear is the New York law firm of Squitieri & Fearon LLP, which is no stranger to bringing such overdraft cases.

In February, Squitieri & Fearon won a $3 million settlement with First National Bank of Pennsylvania, over nearly identical allegations of deposit account data manipulation. A federal court ordered the parties into mediation.

The Pennsylvania bank denied the allegations but cited the prospect of years of costly litigation for agreeing to the settlement.

First Merchants stands to become the second-largest Indiana-headquartered bank, with the planned merger with Munster-based CFS Bancorp., announced earlier this month.

First Merchants will grow to $5.4 billion in assets from $4.2 billion. That compares with the $9.5 billion-asset Old National Corp., of Evansville, which is the largest Indiana-based bank.

After the merger, First Merchants will have nearly 100 offices in 26 Indiana counties, along with a presence in Ohio and Illinois.

It stepped up its central Indiana presence in 2008, when it bought Lincoln Bancorp., in Plainfield.

Last year, First Merchants bought loans and deposits of the failed SCB Bank of Shelbyville.
 

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  1. Please I need help with my class action lawsuits, im currently in pro-se and im having hard time findiNG A LAWYER TO ASSIST ME

  2. Access to the court (judiciary branch of government) is the REAL problem, NOT necessarily lack of access to an attorney. Unfortunately, I've lived in a legal and financial hell for the past six years due to a divorce (where I was, supposedly, represented by an attorney) in which I was defrauded of settlement and the other party (and helpers) enriched through the fraud. When I attempted to introduce evidence and testify (pro se) in a foreclosure/eviction, I was silenced (apparently on procedural grounds, as research I've done since indicates). I was thrown out of a residence which was to be sold, by a judge who refused to allow me to speak in (the supposedly "informal") small claims court where the eviction proceeding (by ex-brother-in-law) was held. Six years and I can't even get back on solid or stable ground ... having bank account seized twice, unlawfully ... and now, for the past year, being dragged into court - again, contrary to law and appellate decisions - by former attorney, who is trying to force payment from exempt funds. Friday will mark fifth appearance. Hopefully, I'll be allowed to speak. The situation I find myself in shouldn't even be possible, much less dragging out with no end in sight, for years. I've done nothing wrong, but am watching a lot of wrong being accomplished under court jurisdiction; only because I was married to someone who wanted and was granted a divorce (but was not willing to assume the responsibilities that come with granting the divorce). In fact, the recalcitrant party was enriched by well over $100k, although it was necessarily split with other actors. Pro bono help? It's a nice dream ... but that's all it is, for too many. Meanwhile, injustice marches on.

  3. Both sites mentioned in the article appear to be nonfunctional to date (March 28, 2017). http://indianalegalanswers.org/ returns a message stating the "server is taking too long to respond" and http://www.abafreelegalasnswers.org/ "can't find the server". Although this does not surprise me, it is disheartening to know that access to the judicial branch of government remains out of reach for too many citizens (for procedural rather than meritorious reasons) of Indiana. Any updates regarding this story?

  4. I've been denied I appeal court date took a year my court date was Nov 9,2016 and have not received a answer yet

  5. Warsaw indiana dcs lying on our case. We already proved that in our first and most recent court appearance i need people to contact me who have evidence of dcs malpractice please email or facebook nathaniel hollett thank you

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