Bank of America to pay $315 million to settle investor claims of deception
Bank of America (BOA) agreed Monday to pay $315 million in a settlement of claims brought by investors alleging they were misled with respect to mortgage-backed investments. Court papers disclosing the settlement agreement were filed in the US District Court for the Southern District of New York. The claims were a part of a class action lawsuit led by the pension fund of the Public Employees' Retirement System of Mississippi, which alleged that BOA's Merrill Lynch unit provided the fund with misinformation regarding the risks of the mortgage-backed investments it made prior to the financial crisis. The settlement agreement now requires the approval of federal Judge Jed Rakoff, who recently rejected a $285 million settlement agreement between the US Securities and Exchange Commission (SEC) and Citigroup Inc, after deciding that SEC did not put any effort into finding out what Citigroup did wrong.
This settlement agreement by BOA is the latest attempt by the corporation to move past legal issues that have plagued it in recent years. Last month, a senior judge for the US District Court for the Southern District of Florida gave final approval to a $410 million settlement in the class action suit against BOA for overdraft fees that affected more than 13 million people. Judge James Lawrence King found this agreement to be fair and reasonable even though customers will not be fully compensated for overdraft fees which averaged approximately $35 per transaction. Approximately 13.2 million customers who had a debit card with BOA between January 2001 and May 2011 will have money credited to their account or will receive checks from BOA as a result of this settlement. The settlement with BOA, which was reached in February, was given preliminary approval in May. BOA is among more than two dozen US, Canadian and European lenders named as defendants in the class action lawsuit, which consolidated claims across the country in 2009. In their amended complaint, the plaintiffs claimed that BOA's practices were deceptive in that they did not reasonably notify customers that they had the option of opting out of the overdraft scheme and declining transactions. The complaint also alleged that BOA's excessive fees disproportionately effect low-income customers.