The California Supreme court ruled in San Francisco Monday that banks can take overdraft fees out of Social Security and other government funds deposited directly into the accounts of elderly and disabled customers.
The panel overturned a 2004 San Francisco Superior Court judgment requiring Bank of America to pay more than 1.1 million customers more than $1 billion for using their benefit money to pay for overdrafts and insufficient-funds fees.
That award included $284 million for fees the bank took out of customers' accounts between 1994 and 2003, plus $1,000 for each of the 1.1 million customers who suffered serious economic or emotional distress.
The customers received benefits such as federal Social Security or Supplemental Security Income, known as SSI, for disabled people.
The court said unanimously that while state laws prohibit banks from taking benefit funds to pay for debts in separate accounts, such as a credit-card account, the laws specifically exempt internal charges made within an account.
Justice Carlos Moreno wrote that "it is clear from the statutory language that the Legislature intended to treat charges for overdrafts and insufficient-funds fees differently from the setoff of independent debt."
James Sturdevant, a lawyer for the customers, called the ruling "disgraceful" and said, "This decision is the latest example of sacrificing the poor who subsist on life support to the altar of greed."
Sturdevant called on the state Legislature and Congress to pass laws protecting automatically deposited Social Security funds.
Bank of America issued a statement saying it was pleased with the decision "rejecting a challenge to account balancing practices followed by every bank in California and across the nation."
The bank said, "The decision today confirms that the bank has always acted lawfuly in maintaining and balancing its customer accounts."