Aug. 3, 2010 at 9:00 AM ET
Jim Noble took Bank of America to small claims court.
If you've ever felt powerless in a fight against a large corporation or been blind-sided by bank fees, you should know about James Noble.
The Charlottesville, Va., software engineer found himself on the short end of a credit card interest rate increase and facing $300 in overdraft fees levied by Bank of America earlier this year. In both cases, he felt the costs were unfair, but he couldn't get anyone at the bank to listen.
"Customer service is so bad at most places now, it's really starting to get to the point where you have to go to court to be treated fairly," he said.
So he did.And he won – a judgment of almost $900 against Charlotte, N.C.,-based Bank of America.
Noble took advantage of an often overlooked option in U.S. judicial systems: small claims court.Because small claims courts are inexpensive and informal, plaintiffs can represent themselves. If Internet groups devoted to small claims cases are any indication, frustrated consumers with small-dollar beefs against corporations are increasingly turning to small claims as a way to get satisfaction -- and refunds.
From the start, Noble felt he had a strong case, even though he said Bank of America initially responded to his pleas like a brick wall. The overdraft fees, he said, were triggered when the bank inexplicably delayed crediting his account with a deposit for an extra 24 hours. He was watching the account closely, he said, and managed to get screen captures detailing what he called unfair debiting procedures.During the next several days, some of his payments cleared, but were then retroactively assessed overdraft fees.Before the incident was over, he owed Bank of America nearly $280 in overdraft fees.
At about the same time, Noble was five days late with a credit card payment.He blamed a glitch in Bank of America’s payroll system, which failed to direct deposit his paycheck and instead mailed him a paper check.
He was then told that his rate would be increased from 10 percent to 28 percent, but his cardholder agreement gave him the option to opt-out of the increase.
Betty Reiss, a Bank of America spokeswoman, said the bank could not comment on the specifics of the case.
“We deny the allegations in the complaint, but we can't comment on an individual customer’s account for privacy reasons,” she said.
Federal regulations require banks to give consumers notice when their interest rates will rise, and give them the opportunity to opt out of the increase.Consumers rarely take this option, though, because when they do banks generally close their accounts.
FDIC doesn't protect your money from fees
In Noble’s case, when he called the bank to opt out, he said the Bank of America operators had no idea what he was talking about.One told him his rate hadn't increased; others had no idea how to opt him out of the increase.
Suspicious, he kept careful phone records.His interest rate did in fact go up, eventually costing him roughly $600 in interest charges.
"When you deposit money with banks you are entrusting them, and perhaps your money is FDIC insured,” he said.“But you are not FDIC insured against people sitting in a boardroom thinking up ways they can take your money.”
Noble escalated his complaints to an operator in executive customer service, which offered to lower his rate to 14 percent. He balked, insisting on his original rate.When the bank wouldn't budge, he decided to research his legal options and found a video produced by filmmaker Karney Hatch called "Overdrawn," which includes instructions on filing a small claims case.
In June, Noble paid the $56 filing fee and took the bank to court. In his complaint, he claimed the maximum amount allowed in Virginia’s small claims courts -- $5,000 -- to cover both current and potential future excess interest costs.
A July 6 court date was set, but four days before the date arrived, Bank of America mailed him a letter with a settlement offer.
"They offered me $500," he said. "But I said 'That's not enough.'" Instead, he pulled together his paperwork and headed to court.
Bank of America didn't bother to send legal representation to Charlottesville on July 6, so Noble's case was uncontested. But that didn’t mean he automatically won. The administrative judge presiding in the case reminded Noble that the burden was still on him to prove that Bank of America owed him money. So he whipped out the screen shots, the phone records, the credit card statements.
"I had a lot of evidence that I was right," he said
The judge agreed, but could only award Noble compensation for actual damages -- fees and excess interest charges already levied. Both Noble and the judge whipped out calculators to determine the exact amount of excess interest.But the judge did tell Noble he could return to the court as often as he wished to obtain new judgments against additional excess interest charges.
There are no available statistics on the number of small claims cases filed against banks, or other large corporations. There is, however, a small but growing group of consumers who take advantage of the option and share their success stories online. Most of their cases follow the same pattern -- companies offer settlements to avoid the expense of managing a small claims case. If the cases do go to trial, companies don't bother to appear.
Noble didn't arrive at his strategy out of the blue. He said he'd watched his father sue companies in small claims court as a child.But the experience has left him with a good taste in his mouth.
“It has renewed my faith in the system, the availability of something like small claims court," he said.
Of course, nothing's perfect. Noble has yet to collect his judgment from Bank of America.And while the court maintains the bank must pay him 6 percent interest until it pays up -- that's much better than any high-yielding interest account he could otherwise get from the bank -- collecting judgments is no trivial matter.
Reiss said she could not comment on Bank of America’s next legal step.
Many small claims winners report having to enlist the legal system a second time to get their money.
Still, Noble thinks more consumers should channel their frustration through the small claims court system.
"I believe that the answer to the ‘too big to fail’ problem starts with not allowing banks to steal their customers' money,” he said.
RED TAPE WRESTLING TIPS
Noble has a programmer's sensibility towards archiving information, and that really helped him prove his case.Consumers who would consider small claims court should mimic his detail-oriented style -- screen captures, spreadsheets, call logs and other paperwork will serve any plaintiff well.
One important technical piece of advice: when filing a claim against a large corporation, plaintiffs must find out who that company's "registered agent" is in the state where the case will be filed (usually, the plaintiff's state). The registered agent must be served with notice of the case. Failing to do could lead to a dismissal, so it's probably worth paying a nominal fee to have a county sheriff's official serve the notice.
Finding the agent is not hard; generally consumer can call the secretary of state's office, or look online. For example, Florida has a convenient search tool:
Searching for Microsoft, for example, yields several options. Clicking on the most recent yields the address of the current registered agent – in this case “Corporation Service Company” in Tallahassee, Fla.
Fees for small claims are nominal, usually under $75, and cases can often be filed from the comfort of your home or office using a Web-based tool. There are many resources online to find the right procedures and costs for your state. Here are two:
Finally, don’t assume you’ll have an easy fight just because others have.Companies or individuals sued in small claims court can ask to have the case transferred to district court, which will immediately raise the stakes (i.e. the legal fees). If that happens, you’ll have to decide whether to pay for legal help or throw up a white flag.