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Maryland’s Intermediate Appellate Court holds that Bank’s use of “Batch-Processing” method of debiting consumers’ accounts did not violate Maryland’s Consumer Protection Act

Margolis v. Sandy Spring Bank
___ Md. App. ___, No. 2215 (Md. App. Feb. 26, 2015)

by Wayne C. Heavener, Associate
Semmes, Bowen & Semmes (

Available at:

In Margolis v. Sandy Spring Bank, Maryland’s intermediate appellate court held that a bank’s practice of “batch-processing” did not violate Maryland’s Consumer Protection Act. “Batch-processing” refers to the practice of debiting a bank customer’s account at the close of the business day in order of the largest transaction first and the smallest transaction last. The Court held that the circuit court appropriately dismissed a plaintiff’s putative class action against the defendant-bank because the defendant-bank did not mislead its customers in using the batch-processing method of debiting its customers’ accounts. Rather, the practice was disclosed in the bank’s deposit account agreement.

Daniel Margolis (“Plaintiff”) filed a putative class action against Sandy Spring Bank (“Bank”) for alleged violations of the Maryland Consumer Protection Act arising out of Defendant’s practice of batch-processing debit-card transactions. Plaintiff alleged that Defendant reordered customers’ debit card transactions at the end of each business day, and debited customers’ accounts with the largest transaction amount first irrespective of what chronological order those transactions were made. Plaintiff alleged that Defendant’s practice resulted in increase overdraft fees at the expense of misleading Defendant’s customers. The Court offered the following example of how Plaintiff argued batch-processing resulted in an increase of overdraft fees to consumers:

By way of example, suppose a Sandy Spring customer’s account contained $100.00, and the customer used her debit card for a $10.00 transaction, followed by a $20.00 transaction, and finally a $90.00 transaction. If Sandy Spring processed the transactions in chronological order, the customer would overdraw her account only when she made the final $90.00 debit, and the bank would charge only a single overdraft fee. However, when the bank batch-processes these same transactions and reorders them from largest to smallest, the bank first deducts $90.00, then $20.00, and lastly $10.00. Under batch-processing, therefore, the account becomes overdrawn at the second transaction, for $20, and the customer incurs two (2) overdraft fees.

Margolis v. Sandy Spring Bank, ___ Md. App. ___, slip op. at 3 (Md. App. Feb. 26, 2015). Defendant moved to dismiss Plaintiff’s claim on two (2) grounds. Defendant argued that Section 4-303(b) of Maryland Commercial Law Code, which provides that “items may be accepted, paid, certified, or charged to the indicated account of its customer in any order,” explicitly authorized Defendant’s use of bath-processing. Second, Defendant argued that it disclosed its batch-processing practices in its Deposit Account Agreements with customers. The circuit court granted Defendant’s Motion to Dismiss, and Plaintiff appealed.

The Court of Special Appeals affirmed, and held that Defendant’s practice of batch-processing was not a violation of the Maryland Consumer Protection Act because the practice was adequately disclosed in the Deposit Account Agreements. The Court first addressed Defendant’s contention that batch-processing was explicitly permitted under Md. Code Ann., Comm. Law § 4-303(b). The Court held that Section 4-303 applied only to negotiable instruments, such as checks. The Court determined that the use of the work “items” foreclosed the conclusion that the statute pertained to debit card transactions. The Court found Defendant’s second argument more availing. The Court determined that the Deposit Account Agreements adequately disclosed Defendant’s batch-processing method when stating that “[i]n general,” the bank “currently process[es] [a customer’s] Orders, including but not limited to ATM and POS transactions . . . at the end of each business day in high to low dollar amount.” Margolis, slip op. at 12. As a result, the Court determined that Defendant did not mislead Plaintiff, and that Defendant’s practice of batch-processing did not run afoul of the Maryland Consumer Protection Statute.