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Dave Kolpack, Associated Press, Published July 24 2013

Underwood, N.D., woman drops overdrafts lawsuit against Fargo bank

FARGO — A federal judge on Wednesday approved a request by a North Dakota woman to drop her lawsuit accusing Fargo-based Gate City Bank of changing the sequence of checks and charging unfair overdraft fees.

The head of the bank said the lawsuit was frivolous and never should have happened.

Amber Pieloor, of Underwood, alleged that Gate City Bank changed the debit entries to process the largest ones first, rather than the order that the transactions took place. The bank denied the charges.

Pieloor's attorney, Dan Gustafson, said his client believed she had a strong case but changed her mind after an informal meeting between the two parties.

"We did what we believed to be the responsible thing: We called up the lawyers for Gate City and said, 'We've looked at your stuff, you've answered our questions, and we don't think you do it the way we alleged it,'" Gustafson said.

Gustafson said the end result of the meeting, which was arranged after a recommendation by U.S. Magistrate Judge Charles Miller, saved both sides of lot of money because they didn't go through formal evidentiary hearings.

"It was a good way to do it. Everybody sort of did what I would call the professional thing," Gustafson said.

Steve Swiontek, Gate City president and chief executive officer, told the Associated Press Wednesday that the bank spent more than $200,000 on the litigation.

"We believe in giving back and philanthropy, and to think about this $200,000 that was just frittered away because it wasn't true," Swiontek said. "It was just really unfortunate. Why didn't they just call us right away? We could have sat down with them and proved it to them."

Pieloor's lawsuit, which originally sought class-action status, claimed that Gate City re-sequenced the checks so that the largest charges are paid first in order to deplete the customer's account. Gate City said that's not possible because it uses an online, real-time system were transactions are posted immediately.

"During any particular day, a Gate City customer may have a higher debit charged to their account before a lower debit is charged," Todd Zimmerman, Gate City's lawyer, said in court documents. "That results simply because the debits were received in the order from a processor, bank or other third party."

The lawsuit is one of several throughout the country alleging that banks are manipulating the order of debits. A federal judge in California has ordered Wells Fargo to pay $203 million back to customers who paid multiple overdraft fees.

U.S. District Judge Daniel Hovland on Wednesday ordered Pieloor's suit dismissed with prejudice, which means she cannot file further legal action in the case.

"The allegations that we had, which we were pretty confident of, just turned out not to be the case," Gustafson. "What looked like re-sequencing was explained in a different way and we were satisfied with the explanation."

Copyright 2013 The Associated Press.