A federal judge has preliminarily approved a class-action settlement of a lawsuit involving the resequencing of debit card transactions at First National Bank of Pennsylvania, and set a hearing for June.
FNB customers whose accounts may have been resequenced, boosting the amount of overdraft fees they were charged, will be notified of their eligibility to receive part of the settlement.
FNB, based in Hermitage, set aside $3 million to pay the settlement. Plaintiff attorney’s fees, costs and settlement administration fees also will be pulled from the settlement account, with the remainder going to eligible customers.
The plaintiff’s attorney are asking for 33ê percent of the settlement for attorney’s fees, and FNB has agreed not to oppose it. U.S. District Court Judge Arthur J. Schwab, Pittsburgh, has final say on all settlement details.
Schwab will hold a fairness hearing June 21.
Two sets of plaintiffs, Kimberly and Kevin Ord and Joan Clarey, filed individual suits that were consolidated. The suits alleged FNB “resequenced” debit transactions - processed them out of chronological order - so that the bank could collect more overdraft fees.
Resequencing transactions is not illegal but the FDIC issued to its member banks a November 2010 “guidance” paper on overdraft payment programs that recommended banks be “especially vigilant with respect to product over-use that may harm consumers.”
The practice has been the subject of lawsuits against larger financial institutions that resulted in settlements in the hundreds of millions of dollars.
FNB did not deny the practice, but said the plaintiffs are trying to impose state regulations on a nationally chartered bank and that a contract dictates the bank’s relationship with its customers. The bank said it can post transactions in any manner it chooses.
As part of the settlement, FNB continued to deny that it did anything wrong, but said it agreed to the settlement to avoid the expense of fighting the suit.
The bank also agreed that “customer paper statements will reflect the actual order of posting.”
Class members will be notified of the settlement by direct mail. A Web site will be posted - it was not up as of Saturday - and advertisements will be placed in Pittsburgh, Erie and Harrisburg newspapers. Potential class members will have the option of declining to receive proceeds of the settlement or objecting to all or part of it.
Class members who receive settlement payments will get checks or credits to their accounts.
The parties did not give an estimate of how many account holders could qualify for the settlement, other than to say it “number(s) in the thousands.”
The Ords and Clarey, who have been named class representatives by Schwab, are slated to receive $3,000 each as “service awards” to compensate them for “the time and effort they contributed to the class as a whole.”