PhotoAnother setback for Bank of America -- it has agreed to pay $2.4 billion to its investors to settle a class-action lawsuit resulting from the 2009 merger with Merrill Lynch & Co.

The lawsuit charged that Bank of America made misleading statements to investors as it pursued the Merrill Lynch acquisition during the financial meltdown that caused it to suffer huge losses.

In agreeing to settle the suit, Bank of America denied wrongdoing and said it agreed to the settlement to eliminate the uncertainties and expense of litigation.  

"As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients," Bank of America CEO Brian Moynihan said in a statement.

The settlement is awaiting final approval by Judge Kevin Castel in the U.S. District Court for the Southern District of New York.

Analysts gasp

Bank of America  Sept. 28, 2012, 2:36 p.m.
Consumers rate Bank of America

The suit has been pending for some time and the settlement was not unexpected. But its size surprised financial analysts and is expected to drive down Bank of America's already sagging stock price even further.

“This settlement is far larger than we expected given the weak merits of such suits and historical precedence,” David Trone, a JMP Securities LLC analyst, wrote in a note to clients, Bloomberg Businessweek reported. “Bank of America is attempting to rebuild its capital base, and these hits will essentially erase the past six months of progress.”

Consumers grumble

While the settlement doesn't directly involve consumers, it's nevertheless likely to further hammer BA's already sagging image with its customers.

ConsumerAffairs analyzed about 1.2 million postings to social media and found that consumer perceptions, which had started to climb back into positive territory, slumped back towards zero in recent days, a trend likely to be hastened by the massive settlement.


Long stretch of bad road

Life has not been kind to Bank of America the last few years. Its record of missteps, errors and miscalculations is a lengthy one. Notable disasters include:

  • $25 Billion mortgage settlement Federal and state officials reach a landmark $25 billion  agreement with BA and four other mortgage servicers over foreclosure abuses and fraud, and unacceptable nationwide mortgage servicing practices  
  • $1 Billion fine for mortgage fraud  In February, the bank agreed to pay $1 billion for "fraudulently and recklessly" underwriting loans to unqualified borrowers, thereby defrauding the Federal Housing Administration (FHA).  
  • Great idea - let's charge more fees  Having failed to impose a fee on debit cards, BA thinks may it can change free checking to "free" checking. 
  • Homeowners charge "Pay Plan" was deceptive  A federal class action filed in June 2011 claimed BA told customers its "PayPlan" of automatic weekly or fortnightly mortgage payments would save them money on interest, then "systematically and persistently" took the payments late and charged them even more interest.  
  • BA Settles Overdraft Suit  Lawsuit alleged BA charged excessive overdraft fees. The bank agreed to pay $410 million to put the action to rest.


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