Nov. 8 (Bloomberg) — Bank of America Corp., the largest debit card issuer, won court approval of a $410 million settlement with customers who accused the bank of charging excessive overdraft fees for electronic transactions.

U.S. District Judge James Lawrence King in Miami yesterday approved the accord between the bank and about 1 million account holders, who may receive as much as 45 cents on the dollar on their claims, their lawyers said. That still amounts to a fraction of the overdraft fees they paid, the lawyers added.

“This a marvelous result for the members of the class,” King said at a hearing.

The accord was the first announced and approved of a number of settlements of claims that banks such as Charlotte, North Carolina-based Bank of America processed account transactions in a way to make it more likely to incur overdraft fees. Union Bank NA, based in San Francisco, agreed last week to pay $35 million to settle the same claims with its customers.

“We’re pleased to have reached a fair resolution in this matter,” Anne Pace, a spokeswoman for Bank of America, said yesterday in a phone interview.

At issue in the case was the automatic charging of overdraft fees for debit card transactions to about 13.2 million customers. Consumers alleged Bank of America and other banks, including JPMorgan Chase & Co. and Wells Fargo & Co., adopted policies designed to force customers to pay illegal overdraft fees.

Policy Change

The Federal Reserve last year established rules barring lenders from automatically charging fees when consumers have insufficient funds for electronic or debit transactions.

Bank of America didn’t admit any liability in the settlement.

The bank has changed its transaction processing policies since the cases were filed in 2009. Consumers are no longer charged overdraft fees on debit transactions, and they pay smaller penalties than previously for overdrawing their checking accounts.

Along with the settlement, King approved $123 million in legal fees for customers’ lawyers. That amounts to 30 percent of the accord, which drew objections from some Bank of America customers.

“Because of the large amount involved, we should not blindly apply the 30 percent rule” for legal fees generated by a settlement, Elliot Kula, a lawyer for six objectors, told the judge.

King said Bank of America customers may not have “ever seen a penny” of recovered overdraft fees without the “massive effort” of their lawyers.

“I find it fair and reasonable” that customers’ lawyers would request a fee amounting to 30 percent of the recovery, the judge said.

More than 13 million Bank of America (BAC) debit-card customers could see some repayment for excessive overdraft fees the bank charged between January 2001 and May 2011.

On Monday, a federal judge gavefinal approval to a $410 million settlement in a class-action lawsuit to compensate customers who were charged fees one or more times as a result of the bank’s practice of posting debit card transactions from highest to lowest dollar amount, rather than in the order they occurred. The bank stopped doing that in May 2009.

Bank of America is far from the only one to have made that practice a policy. Suits have also been filed against J.P. Morgan Chase & Co. (JPM), Citigroup (C) and Wells Fargo (WFC), among others. The majority of banks have since changed their policies and no longer process debit-card charges that way.

The banking industry has defended the system as a way to help customers clear their largest bills first. But in reality, it was a golden goose for overdraft fees, which ranged from $25 to $35 per overdraft.

The practice was so entrenched that one consulting company developed specialized software aimed at helping banks facilitate the high-to-low ordering and to maximize consumer fees,American Banker reported in September. One financial institution — Union Bank of California — signed up and agreed to pay the consulting company a 20% cut of the fees. That bank reversed its policy last year andsettled for $35 million last week.

For consumers, it can be hard to figure out the details of a bank’s overdraft policy and its transaction processing system. Details may be available, but they’re buried in the lengthy disclosure statements attached to the accounts, which run to an average of 111 pages. That’s one reason there is a new push on Capitol Hill to streamline checking account disclosures to one page. Meanwhile, if you want to know how your charges are being processed, just call your bank and ask, consumer advocates advise.

Monday’s settlement with Bank of America came with a steep price tag. The $123 million attorney bill means less than $300 million will be paid out to its customers. Those who are included in the settlement will see automatic credits to their account. Former customers will have checks mailed to them.

MIAMI — A federal judge on Monday gave final approval to a $410 million settlement in a class-action lawsuit affecting more than 13 million Bank of America customers who had debit card overdrafts during the past decade.

Senior U.S. District Judge James Lawrence King said the agreement was fair and reasonable, even though it drew criticism from some customers because they would only receive a fraction of what they paid in overdraft fees. The fees were usually $35 per occurrence.

“It’s really undisputed that this is one of the largest settlements ever in a consumer case,” said Aaron Podhurst, a lead attorney for the customer class.

The settlement became final a week after Charlotte, N.C.-based Bank of America backed off a plan to charge a $5 monthly fee for debit-card purchases. The outcry prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel trial tests of their own debit card fees.

Bank attorney Laurence Hutt said 13.2 million Bank of America customers who had debit cards between January 2001 and May 2011 would get some payment. Those who still have accounts would get an automatic credit and the others would get a check mailed to them. No one would have to take any action or fill out any paperwork.

Barry Himmelstein, an attorney for customers who objected to the deal, said he calculated that the bank actually raked in $4.5 billion through the overdraft fees and was repaying less than 10 percent. He said the average customer in the case had $300 in overdraft fees, making them eligible for a $27 award – less than one overdraft charge – from the lawsuit.

“It’s $4.5 billion that’s gone missing from people’s accounts,” Himmelstein said.

Hutt said only 46 customers filed formal objections to the settlement and 350 decided to opt out, meaning they could take separate legal action on their own.

“It’s very easy for people to say on the sidelines, `I could do better,'” Hutt said. “Never is a settlement at 100 percent of what somebody thinks they can receive at trial. It’s always a compromise.”

Customers will receive a minimum of 9 percent of the fees they paid through the settlement, Hutt added. The bank has already paid the money into an escrow account.

The lawsuit claimed that Bank of America processed its debit card transactions in the order of highest to lowest dollar amount so it could maximize the overdraft fees customers paid. An overdraft occurs when the account doesn’t have enough money in it to cover a debit card transaction. Similar lawsuits have been filed against more than 30 other banks.

Despite the settlement, Bank of America insists there was nothing improper about the processing sequence. New regulations enacted following the recent financial crisis prohibit banks from charging overdraft fees on debit cards without first getting customer permission.

Many of the objections concerned the fees for the team of class-action attorneys, which would amount to about $123 million. Lawyers for people opposed to the settlement said that amount should be cut down by at least $50 million, with the money going back to the wronged customers.

“The best use is to provide compensation to the class members,” said Elliott Kula, who represents some of the objectors.

But King sided with the plaintiffs’ attorneys, noting that they spent thousands of hours on the case and achieved “a superb result” for the customers.

“I don’t see anything about this case that’s simple or garden variety,” the judge said.

Another complaint concerned missing records for customers from 2001 through 2003, which has made them impossible to identify. The settlement will take about 14 percent of the total – representing an estimate for the fees paid by those customers – and put the money into nonprofit financial literacy programs.

In addition, the 32 original named plaintiffs who represented the larger class will get bonuses of up to $5,000 each, $2,500 each if both plaintiffs are a married couple.