A state appeals court in San Francisco has overturned a ruling that Bank of America Corp illegally raided customers' Social Security benefits to pay fees, a case that could have cost the bank $1.6 billion.
The decision reversed a 2004 award of $296.7 million of compensatory damages and restitution, and the potential for $1.3 billion of further damages.
The class-action case involved allegations that the No 2 US bank dipped into Social Security direct deposit accounts to collect fees from 1994 to 2003 for overdrafts and other debts.
A trial judge accepted a jury finding that Charlotte, North Carolina-based Bank of America should pay $1,000 to each plaintiff who suffered emotional or economic harm.
Lawyers for the plaintiffs have estimated that 1.3 million customers, many of whom were elderly or disabled, were affected.
The appeals court said the trial court misapplied a 1974 California Supreme Court decision that barred a bank from deducting fees from an account containing government benefits to cover delinquencies in a separate credit card account.
Bank of America spokeswoman Shirley Norton said: "Bank of America maintained all along that it acted lawfully and followed standard banking practice in maintaining and balancing customer accounts."
Lawyers for the plaintiffs could not immediately be reached for comment.
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