Debit Cards and Overdraft Protection: The US Allows Banks To Steal 10 Billion Dollars Per Year From The Poor

In August, 2007, I reported on a lawsuit brought by the U.K. Office of Fair Trading (the equivalent of our Federal Trade Commission) to curb unfair overdraft fees. (You can read that entry here). I think, and I believe any reasonable person would agree, that the banking practice surrounding overdraft fees should be illegal. Of course, banks should not be required to give free loans, but the current practice is purposefully designed to take advantage of consumers who maintain low balances. Banks: (1) encourage debit card use; (2) set flat-rate overdraft fees which are often multiple times the amount of the actual overdraft transaction; (3) purposely do not offer a real-time account balance; (4) as a default, allow transactions to go through even after an account has overdrafted; and (5) account for the debits from your account by resequencing them each day from highest to lowest, thus maximizing any potential overdrafts.

There has been some academic and judicial commentary against these practices, but in general they have been sanctioned by the U.S. Government. Overdraft fees and "overdraft protection programs" became common in the 1980's, and early U.S. litigation treated them as what they were: loans. During the 1990's, however, the Federal Courts began interpreting the fees as something other than short-term loans, and refused to apply usury laws to them. In 2002, the Comptroller of Currency formally approved the practice of high-low sequencing, then, in 2003, in Beneficial National Bank v. Anderson, 539 U.S. 1 (2003), the Supreme Court held that the National Banking Act pre-empts state regulation of national banks (i.e. banks with an "N.A." after the name) and makes them subject only to the usury laws of their state of incorporation. The banks that were not already incorporated in Delaware or North Carolina (which have laws saying, basically, that banks can charge customers any fee they want), quickly did so.

The disturbing thing about abusive overdraft fees is that the fees, by definition, target the people who can least afford them. According to a recent study by the Center For Responsible Lending, U.S. Banks earn over 10 Billion Dollars each year from overdraft fees, 7.3 Billion of which is taken from individuals who are on the border of financial solvency. According to this same study, the average return on investment for the banks for debit card overdrafts is $2.17 for every dollar overdrawn. Even if it takes the consumer a full week to deposit overdrawn funds in the account (which is a generous estimate), the bank still earns an interest rate of over 6000% on a loan that the consumer probably never consented to and was wholly unaware of at the time. People may be willing to pay $3 for a coffee at Starbucks, but I doubt anyone would willingly do so knowing that they would also incur a $35 fee from their bank.

U.S. judicial and legislative cow-towing to banks has been so pervasive that banks are even trying, with success, to usurp social security benefits -- which have the strongest available protection against being siezed to pay debts -- on the pretense of overdraft fees. See Miller v. Bank of America, NT & SA, 144 Cal. App. 4th 1301, 51 Cal. Rptr. 3d 223(Cal. App. 1st Dist. 2006)(Note: this case is presently pending before the California Supreme Court). Banks also routinely partner with colleges, so as to have easier access to their most succeptable prey. (See USA Today Story regarding N.Y. Attorney General's Investigation, here).

But the government has woken up, and is stepping in to correct the injustice: just not in the US government. In April, an intermediate appellate Court in the U.K. ruled that the U.K. Office of Fair Trading can review overdraft fees for fairness. See the BBC Story here, and the judgment here. Some momentum has been building in the U.S. to incite similar action by our government. As reported by the Consumer Law and Policy Blog, Professor Andrew Rosberg recently drafted an article comparing US and UK regulation in this matter; as I mentioned in my earlier piece, there is an excellent article by a group led by Professor Aruna Apte entitled "The Impact of Check Sequencing on NSF (Not-Sufficient Funds) Fees," 34 Interfaces 97 (March, 2004); and the Center for Responsible Lending offers a variety of terrific research on the issue. This momentum, however, is mere grumbling compared to the political clout of national banks, which are now quickly being purchased by credit card companies, such as Capital One and MBNA, with a proven track record for taking advantage of consumers whenever possible.

If you would like more information, please see my other related posts:

* February 8, 2009, "Potential Tide-Turning Victory In The Battle Against Illegal Overdraft And Non-Sufficient Fund Fees: Bank Of America Settles Closson Class Action."

* June 27, 2008, "Week In Review," (the Federal Reserve is now considering a rule to curb abusive overdraft fees by banks).

* May 7, 2008, "Debit Cards and Overdraft Protection: The US Allows Banks To Steal 10 Billion Dollars Per Year From The Poor."

* August 31, 2007, "The UK Takes Steps to Curb Illegal Overdraft Fees, But US Efforts Have Not Been So Well Received."

Also, consider the following outside sources:

* The Washington Post, Bailout recipients also major lobbyistsashington Post Article, (1/23/2009)

* USA Today, FDIC: Bank overdraft fees hit young, low-income customers, (12/3/2008)(Overdraft fees are boosting banks' profits at the expense of consumers, especially young and low-income people, finds a new Federal Deposit Insurance Corp. study.")

* USA Today, Banks raise penalty fees for customers' overdrafts (6/18/08)

* USA Today, Good news in the works on overdraft charges, 6/3/08.

* USA Today, Banks' check-clearing policies could leave you with overdrafts, (11/19/2006)

* USA Today, Banks' check-clearing policies could leave you with overdrafts (11/20/06)

* Wikipedia, Overdraft

Notice of Entry and Notice of Appeal: A Boring Topic, With A Noble History

For the last 150 years, New York's courts have, for the most part, followed the same procedure for processing orders and judgments. When a judge issues an order, that order must then be "entered," i.e. filed with the county clerk. The county clerk keeps a minute book, which is essentially a ledger, and whenever anything is filed a notation is made in the book. The clerk's minutes are now usually entered twice: they are hand written and then typed into a computer system. If you go to the records room of most courthouses -- particularly older courthouses, like the Manhatten Supreme Court -- you will see clerk's minute books going back hundreds of years.

Entry is important for several reasons: judgments do not begin collecting interest until they are entered, and appeals cannot be taken from an order that was not entered. Often, there is a significant gap of time between when an order is issued and when it is entered. How long it takes depends on how quickly the judge sends the order to the county clerk, if they send it at all. Just because you were mailed a copy of the order does not necessarily mean it was entered, and in some instances the judge will leave it to the parties to enter the order with the county clerk.
It seems odd that you would receive a document from the court, but then have to re-file it with the court before it takes effect, but that is how it sometimes works.

Pursuant to C.P.L.R. 5513, to preserve an appellant's right to appeal, a notice of appeal must served and filed within thirty days after service upon the appellant of a notice of entry. In the Federal Courts and many other states, the time for noticing an appeal begins the moment an order is entered. New York State Court, however, adds the twist that a "notice of entry" must be served.

"To be effective the ‘Notice of Entry’ must strictly comply with CPLR 5513 and state exactly when and with whom the order or judgment was entered, and if it describes the judgment or order, the description must be accurate." Unique Marble & Granite Org. Corp. v. Hamil Stratten Props., LLC, 13 Misc. 3d 1239A, 831 N.Y.S.2d 357 (Queens County Sup. Ct. 2006) citing Reynolds v. Dustman, 1 N.Y.3d 559, 772 N.Y.S.2d 247 (2003)(service of an unstamped copy of the order, with a cover letter saying it had been filed with the clerk, did not constitute proper notice of entry).

Although modern litigation practice is often forgiving of minor mistakes, "strict practice must be pursued to limit the time to appeal," and thus a notice of entry must be accurate. Falker v. New York, W. S. & B. R. Co., 100 N.Y. 86, 2 N.E. 628 (1885). An incorrect date of entry is a material defect that renders a notice of entry void. Nagin v. Long Island Savings Bank, 94 A.D.2d 710, 462 N.Y.S.2d 69 (2d Dept 1983); Ping Lum v. YWCA, 136 A.D.2d 972, 525 N.Y.S.2d 82 (4th Dept. 1988).

There is, however, no formal requirement for how a notice of entry is formatted. A party can, for example, provide a stamped copy of the order and rely on the clerk's stamp to provide the material elements of "date of entry and the name of the clerk of the court where the order was entered." Norstar Bank v. Office Control Sys., 78 N.Y.2d 1110 (1991). See also Deygoo v. Eastern Abstract Corp., 204 A.D.2d 596; 612 N.Y.S.2d 415 (2d Dept. 1994)(the absence of an index number is not a material defect in a notice of entry).

This system of entering orders and noticing entry appears to have originated in the 1840's and 1850's, when the Field Code and New York's first Code of Procedure was drafted. (Google Books has a good selection of old civil procedure treatises). At common law, there were no interlocutory appeals. After a judgment was entered, the losing party could submit a "writ of error" to the appellate court, and had the opportunity to include "appeals" regarding interim orders (such as discovery orders) only when they filed their write of error. With the enactment of the Code of Procedure in 1849, the term "appeal" was used for both final and interlocutory orders. For lawsuits that were pending in 1849, they were given two years from entry of judgment within which to file their appeal.

For new lawsuits after 1849, the parties were given "thirty days from after written notice of the judgment or order shall have been given to the party appealing." In the commetary, the drafters explain that the time for appealing does not begin to run until after the order or judgment is entered. The language was somewhat ambiguous, but there were a few early cases that clarified the practice.

The procedure today is substantially the same as it was in the nineteenth century. (See Falker, Supra). The one notable exception is that the Code's language indicates that only the successful party could serve notice of entry, not the prospective appellant. Thus, someone who won summary judgment, for example, could delay an appeal by not serving notice of entry. In his 1899 Encyclopedia of Pleadings and Practice, William McKinney suggests that the proper procedure in such a situation is to move the lower court to compel the successful party to serve notice of entry. The C.P.L.R. corrected this problem, and allows for either party to serve notice of entry.

Note: The motion that precipitated this post was: Barbera v. Summit School, 2008 NYSlipOp 71932U (2d Dept., May 14, 2008)("motion... to dismiss the appeal as untimely taken is denied on the ground that the notice of entry was defected and the entry date of the order was incomplete").  I did not want to mention the case in the original post until the motion was finally decided.

RELATED POSTS:

* How To Argue An Appeal
* New York Motion Practice

Looking for a Long Island Attorney?  Call me at 631-482-9700, or email me at Skreppein@Qhmlaw.com.  

To Catch A Predator Catches A Lawsuit

One of my favorite areas of law is Constitutional Rights litigation, and I consider myself lucky to be responsible for a few such cases.

I came across this decision today, Conradt v. NBC Universal , that I thought I would share. Conradt was a retired district attorney in Texas who was caught on NBC's "To Catch A Predator," which is a reality television show that works with law enforcement to catch pedophiles. The show ordinarily has someone pose as a child on the internet, arrange a meeting, and then the pedophile shows up to find the police and an NBC camera crew.

Conradt, however, did not go to the house, and so -- according to the complaint -- NBC arranged with the police for him to be arrestaed by a SWAT team. The complaint alleges that the show purposely made a spectacle out of the arrest, and Contadt committed suicide as a result. Most of the causes of action were dismissed, but the court (the Southern District of New York, Judge Chin) allowed two to proceed against NBC: a cause of action for Intentional Infliction of Emotional Distress, and a cause of action for violating Conradt's civil rights under the 4th and 14th Amendments. One of the more interesting aspects of the decision is that NBC conceded that it was functioning as a state actor, thus allowing the Constitutional claim to go forward.

Slip and Fall on Snow and Ice

Call for a free consultation - 631-482-9700.  In home and hospital visits are available.

Original Post: 

I recently co-authored an article on Snow and Ice Litigation for the New York State Trial Lawyer's Association Journal, Bill of Particulars, with a fellow associate, Sarah Bernett, and my firm's managing partner. Since there is about nine inches of snow on the ground right now (Here's a News Story), I thought this might be a good opportunity to post the article here.

Snow And Ice Litigation In New York State

The air is crisp, people are festive, holiday sales abound, and you are trying to remember exactly when it began to get really cold last year. For a plaintiffs’ attorney, this means that it is time to prepare for an influx of snow and ice cases. Snow and ice plaintiffs tend to approach their prospective attorneys with three pieces of information: I fell, I was hurt, this was the location. If you are lucky, they may bring photographs. Establishing liability, however, requires much more. Snow and ice litigation follows the same analytical framework as ordinary negligence: duty, breach, causation and damages. Because issues involving snow and ice are frequently litigated, however, and because this area is often subject to regulation, snow and ice litigation has numerous unique issues. This article discusses three of the more problematic issues: (1) how to prove liability against a property owner for failure to remedy a dangerous snow and ice condition; (2) who can be named as a defendant other than the property owner; and (3) what unique substantive issues arise when the defendant is a municipality.

I. PROPERTY OWNERS

Property owners’ duty to remedy a dangerous snow and ice condition is limited to snow and ice of which they have notice and a reasonable time to correct. Dickerson v. Troy Housing Authority, 34 A.D.3d 1003, 1004-1005, 825 N.Y.S.2d 162, 164 (3d Dept. 2006). In most situations (unless notice is admitted or there is some evidence tending to show actual notice), plaintiffs prove their case by establishing constructive notice. Climatology data, particularly hourly charts of temperature and precipitation from sources such as the National Oceanic and Atmospheric Association, are often extremely important in demonstrating constructive notice. Other factors that can be used to demonstrate constructive notice include: size, thickness and location of the ice. Gonzalez v. American Oil Co., 42 A.D.3d 253, 836 N.Y.S.2d 611 (1st Dept. 2007) (large thick ice adjacent to front door to establishment). Testimony, consistent with climatological data, that the ice was left unremedied for a significant period of time prior to the accident will be sufficient to create a triable issue of fact. Rodriguez v. 326-338 E. 100th St. Partners, 40 A.D.3d 439, 836 N.Y.S.2d 172 (1st Dept. 2007). In contrast, testimony by a plaintiff that the icy condition on which he or she fell consisted of "black ice" that was not apparent upon a reasonable inspection has been found fatal to a plaintiff's claim. Robinson, et al. v. Trade Link America, et al., 833 N.Y.S.2d 243, 833 N.Y.S.2d 243 (2d Dept. 2007); Raju v. Cortlandt Town Center, 38 A.D.3d 874, 834 N.Y.S.2d 211 (2d Dept. 2007).

Under the storm in progress doctrine, also known as the ongoing storm defense, a land owner is not required to clear snow and ice until a reasonable time after the storm ceases. Solazzo, Jr., et al. v. New York City Transit Authority, et al., 6 N.Y.3d 734, 810 N.Y.S.2d 121 (2005). A temporary lull in storm activity does not trigger the property owner's duty to clear snow and ice, Thompson et al. v. Menands Holding, LLC, et al., 32 A.D.3d 622, 624, 820 N.Y.S.2d 172, 173 (3d Dept. 2006), however, concomitantly, trace precipitation alone is insufficient to trigger the storm in progress doctrine. Dancy v. New York City Housing Auth., 23 A.D.3d 512, 806 N.Y.S.2d 630 (2d Dept. 2005).

There is no state-wide bright-line rule for how long an icy condition must exist in order to constitute constructive notice. In New York City, Administrative Code 16-123 gives property owners four hours after a storm ceases within which to clear any dangerous snow or ice condition, and until 11:00 a.m. where the storm occurs overnight. See Prince v. N.Y. City Hous. Auth., 302 A.D.2d 285, 756 N.Y.S.2d 158 (1st Dept. 2003). The Third Department has held that "it is unreasonable to require a landlord to discover ice within two to three hours of its formation on a late weekend evening when there is no precipitation, especially when that ice is not visible to people who were walking upon it." Boucher v. Watervliet Shores Assoc., 24 A.D.3d 855, 804 N.Y.S.2d 511 (3d Dept. 2005). The Fourth Department, however, has allowed a case to go to a jury where ice formed from a sudden temperature drop that occurred approximately three hours prior to the plaintiff’s fall. Bullard v. Pfohl's Tavern, Inc., 11 A.D.3d 1026, 784 N.Y.S.2d 265 (4th Dept. 2004). It is important, therefore, to establish early in your evaluation of a potential case the precise amount of time that elapsed between the last snowfall or temperature fluctuation and your client’s accident.

An interesting twist in the storm in progress doctrine occurs when a plaintiff claims to have slipped on an old ice accumulation during or shortly after a more recent storm. In these circumstances, plaintiffs often argue that the ice they fell on was "dirty," and thus most likely left over from an earlier storm. See Cooke v. City of New York, 300 A.D.2d 338, 751 N.Y.S.2d 536 (2d Dept. 2002); Musso v. Macray Movers, 2006 NY Slip Op 7151, 822 N.Y.S.2d 305 (2d Dept. 2006) (summary judgment inappropriate where owner could not say that ice had not been on the ground for several days). In such situations, the outcome will depend on what evidence, such as photographs, testimony and climatology data, the plaintiff can offer to support their claim that they slipped on old ice. Compare Lerner v. Luna Park Hous. Corp., 19 A.D.3d 553, 797 N.Y.S.2d 126 (2d Dept. 2005) (triable issue of fact as to whether ice-patch existed before snow storm during which plaintiff was injured) with Small v. Coney Is. Site 4A-1 Houses, Inc., 28 A.D.3d 741, 814 N.Y.S.2d 240 (2d Dept. 2006) (where storm was in progress at the time the plaintiff fell, the plaintiff's testimony that he fell on old ice he had observed a day or so earlier was purely speculative).

II. OTHER DEFENDANTS

In addition to the most obvious defendant, the property owner, it is important to realize that persons other than the property owner may be responsible for your client's injuries. The property owner's duties to correct dangerous snow and ice conditions often overlap with the duties of third-parties. The most obvious example is when a property owner is on notice, and thus under a duty to correct, a dangerous icy condition that a third party created or exacerbated. See Backiel v. Citibank, N.A., 299 A.D.2d 504, 751 N.Y.S.2d 492 (2d Dept. 2002). Third parties, generally a building management or maintenance company, may also adopt the owner's remedial duty where the contractor's obligations under its agreement with the building owner wholly displace the owner’s snow removal obligation. See Espinal v. Melville Snow Contrs., 98 N.Y.2d 136, 140-141, 746 N.Y.S.2d 120, 123 (2002) (delineating three scenarios where contractual obligations may give rise to tort liability) citing Restatement (Second) of Torts § 324A; cf. Mahaney v. Neuroscience Ctr., 28 A.D.3d 432, 814 N.Y.S.2d 175 (2d Dept. 2006). Property owners are often said to have a "nondelegable duty... to provide safe ingress and egress,” and thus are not relieved of liability by the fact that they delegated their snow removal obligations to an independent contractor. Olivieri, et al. v. GM Realty Company, LLC, 37 A.D.3d 569, 830 N.Y.S.2d 284 (2d Dept. 2007). There is some authority in the First Department, however, stating that a land-owner may fully delegate its snow removal responsibility to a tenant so as to obviate its potential liability. Feiler v. Greystone Bldg. Co., 302 A.D.2d 221, 754 N.Y.S.2d 634 (1st Dept. 2003). “[O]ne who assumes to act, even though gratuitously, may thereby become subject to the duty of acting carefully." H. R. Moch Co. v. Rensselaer Water Co., 247 N.Y. 160, 167 (1928).

Thus, the property owner or any other party may be held liable for creating a dangerous condition, which can range from the most obvious examples such as dumping ice in a busy parking lot or sidewalk, See Orr v. Spring, et al., 288 A.D.2d 663, 665, 732 N.Y.S.2d 697, 700 (3d Dept. 2001); Althorf v. Wolfe, 22 N.Y. 355 (1860), to less obvious examples such as negligent shoveling that packs the snow into a sheet of ice, Jablons v. Peak Health Club, Inc., 19 A.D.3d 369, 796 N.Y.S.2d 174 (2d Dept. 2005). Snow removal and building maintenance contractors are frequent culprits of negligence that renders a walkway more hazardous, See Keese v. Imperial Gardens Assoc., LLC, 36 A.D.3d 666, 828 N.Y.S.2d 204 (2d Dept. 2007) (question of fact where snow removal contractor left snow piled in such a way that when it melted a sheet of ice formed on a walkway); Martinez, et al. v. City of New York, 20 A.D.3d 513, 514, 799 N.Y.S.2d 252 (2d Dept. 2005); Salvanti v. Sunset Industrial Park Associates, 27 A.D.3d 546, 813 N.Y.S.2d 110 (2d Dept. 2006), but anyone who creates or exacerbates a dangerous condition will thereby incur liability. In those cases where it is the owner who is alleged to have created or exacerbated the condition, it may appear that you have a second basis for liability; it is important to remember, however, that the storm in progress doctrine still applies, and a negligent attempt to remove snow during an ongoing storm will not create liability. Wheeler v. Grande'Vie Senior Living Community, 31 A.D.3d 992, 819 N.Y.S.2d 188 (3rd Dept. 2006).

An emerging area of snow and ice liability is the liability of common carriers. In Malawer v. N.Y. City Transit Auth., 6 N.Y.3d 800, 812 N.Y.S.2d 438 (2006), the Court of Appeals held that a bus driver has a duty to provide passengers with a safe location to disembark from the bus. See also Hickey v. Manhattan & Bronx Surface Transit Operating Authority, 163 A.D.2d 262, 558 N.Y.S.2d 543 (1st Dept. 1990). Presumably the analysis would be identical for a taxi driver, but as of yet there is no case law addressing whether taxi drivers have a similar duty.

III. MUNICIPALITIES

Where the property owner is a municipality, a unique set of issues apply. In New York City, for example, the City removed its potential liability for clearing public sidewalks (except for sidewalks adjacent to one-, two- or three-family houses) by placing the obligation to remove snow and ice from public sidewalks onto the adjacent property owner. See NYC Admin. Code 7-210. Even where the municipality is obligated to remove snow or ice, that obligation is limited by the municipalities’ available resources. Thus, in determining whether a municipality failed to remedy a dangerous snow or icy condition, the courts will embark on "a factual evaluation of the several factors impacting on the City's actual ability, given physical and climatic conditions, and its capital and labor resources, to have cleared the location of ice and snow," Murdock v. City of New York, 272 A.D.2d 249, 250, 708 N.Y.S.2d 89, 90 (1st Dept. 2000), and "evidence of a municipality's reliance on property owners to perform this duty and of its efforts to enforce the ordinance within a reasonable time is relevant in determining whether the municipality breached its duty." Garricks v. City of New York, 1 N.Y.3d 22, 27, 769 N.Y.S.2d 152, 155 (2003). Whereas private property owners are required to clear ice and snow conditions within hours of a storm, municipalities, depending on the severity of the storm, may be accorded several days to complete snow and ice removal. Martinez v. Columbia Presbyterian Med. Ctr., 238 A.D.2d 286, 287, 656 N.Y.S.2d 271, 272 (1st Dept. 1997) (New York City not obligated to clear snow within 48 hours where two large snow storms struck the city within a relatively brief period of time).

IV. PRACTITIONER’S TIPS

* A picture is worth a thousand words. If the client has not done it already, get out and take pictures of the location as soon as possible.

* Obtain climatology records to establish the temperature, the date of the last snowfall and whether it was snowing at the time of the accident. Also, if the interpretation of climatology data becomes a contested issue, a good meteorological expert can make or break your case.

* Be sure to establish the location of the accident as precisely as possible. A small difference in location can have very large consequences.

* Be aware that there may be third parties who are liable for your client’s injuries. Demand snow removal contracts, leases and maintenance contracts, and be sure to review them before the statute of limitations expires.

* Notice is important. Ask your client whether he or she observed the dangerous condition in the past, or if they know anyone who may have observed the condition at an earlier time; and be aware that the notion that a slip and fall case is stronger if the plaintiff observed the dangerous condition at an earlier date or time is counterintuitive for many people.

* It is not enough to merely allege that someone created or exacerbated a dangerous condition, you need some evidence to support that allegation.

* Municipal regulations vary. If you are unfamiliar with the municipality in which your client was injured, be sure to review the local laws and ordinances.

* Be wary of suing a municipality unnecessarily. If there is no basis for liability, including a municipality in your lawsuit unnecessarily will be a waste of time and money (both your own, and the tax payers’).


RELATED POSTS:

* A Slip and Fall Lawyer Comments On The December 2009 Blizzard
* How to Protect Your Legal Rights If You Slip and Fall On Snow and Ice
* Should I Hire An Attorney?