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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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  3. All these sites putting up all the crap they do making Brent Look like A Monster like he's not a good person . First off th fight actually started not because of Brent but because of one of his friends then when the fight popped off his friend ran like a coward which left Brent to fend for himself .It IS NOT a crime to defend yourself 3 of them and 1 of him . just so happened he was a better fighter. I'm Brent s wife so I know him personally and up close . He's a very caring kind loving man . He's not abusive in any way . He is a loving father and really shouldn't be where he is not for self defense . Now because of one of his stupid friends trying to show off and turning out to be nothing but a coward and leaving Brent to be jumped by 3 men not only is Brent suffering but Me his wife , his kids abd step kidshis mom and brother his family is left to live without him abd suffering in more ways then one . that man was and still is my smile ....he's the one real thing I've ever had in my life .....f@#@ You Lafayette court system . Learn to do your jobs right he maybe should have gotten that year for misdemeanor battery but that s it . not one person can stand to me and tell me if u we're in a fight facing 3 men and u just by yourself u wouldn't fight back that you wouldn't do everything u could to walk away to ur family ur kids That's what Brent is guilty of trying to defend himself against 3 men he wanted to go home tohisfamily worse then they did he just happened to be a better fighter and he got the best of th others . what would you do ? Stand there lay there and be stomped and beaten or would u give it everything u got and fight back ? I'd of done the same only I'm so smallid of probably shot or stabbed or picked up something to use as a weapon . if it was me or them I'd do everything I could to make sure I was going to live that I would make it hone to see my kids and husband . I Love You Brent Anthony Forever & Always .....Soul 1 baby

  4. Good points, although this man did have a dog in the legal fight as that it was his mother on trial ... and he a dependent. As for parking spaces, handicap spots for pregnant women sure makes sense to me ... er, I mean pregnant men or women. (Please, I meant to include pregnant men the first time, not Room 101 again, please not Room 101 again. I love BB)

  5. I have no doubt that the ADA and related laws provide that many disabilities must be addressed. The question, however, is "by whom?" Many people get dealt bad cards by life. Some are deaf. Some are blind. Some are crippled. Why is it the business of the state to "collectivize" these problems and to force those who are NOT so afflicted to pay for those who are? The fact that this litigant was a mere spectator and not a party is chilling. What happens when somebody who speaks only East Bazurkistanish wants a translator so that he can "understand" the proceedings in a case in which he has NO interest? Do I and all other taxpayers have to cough up? It would seem so. ADA should be amended to provide a simple rule: "Your handicap, YOUR problem". This would apply particularly to handicapped parking spaces, where it seems that if the "handicap" is an ingrown toenail, the government comes rushing in to assist the poor downtrodden victim. I would grant wounded vets (IED victims come to mind in particular) a pass on this.. but others? Nope.

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