Federal appeals court backs Wells Fargo on debit-card charges

Just as the holiday bills are about to come due, a federal appeals court Wednesday ruled that banks may post checking-account withdrawals in a manner that allows them to elicit the most overdraft fees.

In a unanimous decision, a three-judge panel of the U.S. 9th Circuit Court of Appeals overturned a district court injunction that prohibited Wells Fargo from charging Californians overdraft fees based on posting the most expensive debit-card transactions first.

The panel also overturned an order that required the bank to pay its California customers $203 million in restitution.

“Federal bank regulations ... specifically delegate to banks the methods of calculating fees,” the court said.

But the 9th Circuit upheld a ruling that Wells Fargo misled customers about its posting practices, in violation of California law. The panel said the bank told customers that debit-card purchases were deducted immediately from the user’s checking account, while in fact the bank posted the withdrawals from highest to lowest.

The case will return to district court, which may order Wells Fargo to pay customers restitution for misleading them on posting practices.

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Photo: Wells Fargo & Co.'s headquarters in San Francisco. Credit: Noah Berger / Bloomberg