Class Action Alleges Bank of America Tricks Accountholders into Paying Fees for ‘Free’ ACH Transfer Service [UPDATE]

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A proposed class action alleges Bank of America (BofA) has misled accountholders into paying automated clearinghouse (ACH) transfer fees for a service that’s otherwise free when sending money to authorized payees. 

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The 19-page lawsuit claims Bank of America has exploited its informational advantage as a major financial institution and consumers’ unsophistication with regard to complicated financial mechanisms by misrepresenting and obscuring the truth about the National Automated Clearinghouse (NACHA) system, a complex system the case describes as operating “invisibly in the background of much of the nation’s electronic activity.” The complaint alleges that while any transfer made over the NACHA system can, in truth, be made for free, Bank of America nevertheless charges accountholders $3 or $10 ACH transfer fees.

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“For those looking to make a dishonest dollar, the question is a perennial one: how to convince unsophisticated consumers to spend money on an otherwise free or valueless service?” the lawsuit reads. “The answer is also perennial: use superior information to trick consumers who don’t understand a complicated system or novel product.” 

As the lawsuit tells it, the NACHA system relies upon “many actors playing specialized roles, all tying thousands of banking institutions, merchants, and payment processors together.” Per the suit, millions of consumer payments take place on the NACHA system each day, including for utility bills, insurance costs, investment account deposits, monthly memberships and small-dollar Venmo and PayPal transfers, without consumers being aware of the framework that allows money to be sent around. Put simply, whereas almost all other consumer economic activity requires a payor to send or provide funds to a payee, e.g., in an instance where one individual writes a check or hands over cash to another party, the NACHA system allows for payees with proper authorization to “pull” money directly from consumers’ accounts, the lawsuit says. 

“That means, for any given payment or transfer, the NACHA system allows the payee to affirmatively send it or the payor to simply take funds from an account,” the suit elaborates. 

From the lawsuit: 

“An accountholder wishing to make a transfer from their BofA account can easily accomplish this by either ‘pushing’ the funds from BofA via BofA’s online banking portal or ‘pulling’ the funds from BofA via a portal operated by the receiving financial institution. The end result is the same: money transferred seamlessly, electronically, and quickly between accounts.” 

Despite its prevalence, however, the NACHA system and its inner workings remain a mystery to the millions of consumers whose payments are sent through it each day, the suit continues. Knowing this, Bank of America, the lawsuit alleges, has engaged in a “multi-prong effort” to deceive proposed class members about the workings of the NACHA system so as to “use its superior knowledge about the system” to extract more money from accountholders.

For one, Bank of America misrepresents on its online banking interface and website that transferring money from a BoA account to an account at another institution entails an additional charge, the lawsuit alleges. The case says this is false given the design of the NACHA system ensures that transfers made between banks are always available for free when the payee “simply requests the funds.” 

Further, Bank of America, the suit claims, misrepresents the workings of the NACHA system in its online bank agreement, stating that accountholders may send and receive certain types of ACH and wire transfers for $3 or $10, depending on delivery speed. This, too, is false, the lawsuit alleges, claiming accountholders can send and receive ACH transfers free of charge by simply “instructing the payee to pull funds from his or her account.” 

“By stating that an accountholder may ‘send and receive’ an ACH transfer only for $3 or $10, BofA deceives accountholders into believing that such fees are a fundamental part of moving money via the ACH system,” the case says. “That is not true, as described above.” 

The suit points out that while Bank of America states that there’s no fee for inbound ACH transfers, the bank, according to the lawsuit, still deceives accountholders into believing the NACHA system does not allow for the outbound transfer of money without the payment of a fee. 

Lastly, the complaint alleges the design of Bank of America’s online banking interface “yet again misrepresents the true nature of the NACHA system,” in particular by relaying that the “only” options for moving funds via ACH require a $3 or $10 transfer fee. When logged into the defendant’s online banking system, accountholders are shown the option to transfer funds between their accounts at other banks, the case explains. On that screen, the suit says, Bank of America lists three options for delivery speed, allowing accountholders to choose three business days for a $3 fee, next business day for a $10 fee, or same business day for a $30 transfer fee.

“BofA lists only three options—each of which requires a fee,” the complaint reads. “The ‘3 business days’ and ‘Next business day’ ‘ACH Transfer’ for $3 or $10 are the cheapest options, and consumers like Plaintiffs pay these fees under the mistaken belief that such fees are unavoidable.” 

The lawsuit claims the truth of the matter is that the payment of ACH transfer fees is not required in order to transfer money to a payee. According to the suit, none of Bank of America’s major competitors wield the same transfer fee practices given ACH transfers are a service consumers can get for free. 

“Because—in the absence of misrepresentations regarding the NACHA system—no reasonable consumer would ever pay to make an ACH transfer, none of BofA’s major competitors charge ACH Transfer Fees like BofA does, viz., Chase, Capital One, Citibank, HSBC, PNC, TD Bank, Ally, U.S. Bank, and Wells Fargo,” the complaint reads. “Through its misrepresentations, BofA deceives its accountholders into paying for a transfer that they otherwise could get for free.” 

The case looks to represent a nationwide class and New York-, New Jersey- and North Carolina-specific subclasses that include all Bank of America accountholders who, during the applicable statute of limitations period, were charged ACH transfer fees on an ACH transfer to a payee. 

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