Bank of America sued after Zelle money transfer service led to claims of surprise fees
Bank of America is being sued by a customer who claims the bank “misrepresented” its free money transfer service and failed to warn her and others about the fees it could cause, court documents show.
The recent Mecklenburg County Superior Court lawsuit alleges that the Charlotte-based bank marketed the pay network Zelle to customers without making it clear that using the service could incur “huge amounts” in overdraft and insufficient fund fees.
That resulted in multiple “expensive” overdraft fees as a result of using the service for the plaintiff, Chicago resident Shawna Spraggins, and other customers, the complaint alleged.
“We disagree with the allegations and will seek to have the case dismissed,” Bank of America told The Charlotte Observer in a statement Wednesday.
The claim said that the Charlotte-based bank encourages users to sign up for Zelle and markets the service as an “an effortless, totally free way to send money.” Similar to the app Venmo, Zelle allows users to send money to family and friends by connecting to their bank account.
Bank of America didn’t make clear to customers in contracts or marketing materials that Zelle could operate as a credit device, the lawsuit alleged, meaning that transfers would process regardless of insufficient funds in a user’s account.
That led to unexpected overdraft and insufficient fund fees for customers, Spraggins’ lawyers said. The claim did not say how much in fees Spraggins accrued, although her lawyers say that in one instance she incurred a $35 fee for a $50 Zelle transfer.
Bank of America previously charged $35 for an overdraft fee. In May, the bank decreased that amount to $10 after regulators pushed financial institutions to cut back on the charges. The bank also eliminated insufficient funds fees.
But customers were adversely affected by the bank’s misrepresentation of Zelle before those changes took place, Spraggins’ suit claims.
By misrepresenting Zelle to customers, Bank of America broke an “implied covenant of good faith and fair dealing” that governs contracts in all states, the lawsuit alleged. Lawyers also argued that the bank broke an Illinois law about deceptive business practices.
Spraggins is seeking restitution of fees and reimbursement of legal costs, among other damages. The suit did not specify how much in restitution Spraggins is seeking.
About Zelle
Several other major banks offer Zelle to their customers, including Wells Fargo, JP Morgan Chase and Truist.
The service is operated by Early Warning Services, a company owned and created by seven of the country’s largest banks, including Bank of America. Zelle is the most widely used service of its kind in the US, the court documents said.
This story was originally published July 13, 2022 at 11:05 AM with the headline "Bank of America sued after Zelle money transfer service led to claims of surprise fees."
