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$24.5 Million Settlement in Navy Federal Credit Union Excessive Overdraft Fees Lawsuit

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$6.1 million in lawyers’ fees; more settlements likely

San Diego, CANavy Federal Credit Union has agreed to settle a class action excessive overdraft fee lawsuit for $24.5 million. Plaintiffs’ lawyers will reportedly seek fees of $6.1 million, approximately 25 percent of the total settlement amount. The settlement marks the end of a lawsuit filed in June 2017.

Banks and credit unions became more aggressive about marketing overdraft “protection” once they spotted checking overdraft fees an important source of revenue. It is an area still far less regulated than the payday lending industry. In terms of high cost for very small, short-term loans, however, they are roughly comparable. Savvy banking customers are catching on, though. Do big settlements portend the end of this particular hustle?

Lloyd v. Navy Federal Credit Union

According to the lawsuit, Navy Federal Credit Union would sequester checking account funds when members used their debit cards to cover a transaction, but would “hold” the amount until the transaction settled several days later. At that point, the company would debit the account for the transaction.

In effect, the credit union charged the same transaction twice, often resulting in a negative balance on which it would assess an overdraft fee.

Overdraft fees vary by institution, but they appear to constitute an increasing percentage of corporate revenue. The Consumer Financial Protection Bureau (CFPB) had already flagged this practice as pretty sketchy. The lawsuit is more to the point, alleging that the company violated its own contractual agreements when it assessed overdraft fees in this way.

On October 27, 2014, for example, Jenna Lloyd was assessed $20 overdraft fees for six transactions that settled that day, five of which were debit card transactions that were initiated on or prior to October 26. This was despite the fact that positive funds were deducted immediately for at least three of the debit card transactions on which she was assessed. The only reason any of the five debit card transactions that settled on October 27 incurred overdraft fees was because of a $260 ATM withdrawal that she made after the debit card transactions had already been initiated.

She did not dispute that credit union was within its rights to charge a fee on the $260 ATM withdrawal because it was authorized into insufficient funds. She did protest when the credit union reached back in time to charge fees on the prior debit card transactions.

A similar series of events had happened earlier on January 31, 2014. Ms. Lloyd was assessed three $20 overdraft charges for four transactions, three of which were debit card transactions. Positive funds were deducted immediately and held for at least two of the debit card transactions. The only reason any of the three debit card transactions that settled on January 31 incurred overdraft fees was because of a $400 ATM withdrawal that Jenna Lloyd made after some or all of the debit card transactions had already been initiated.

On February 18, 2014, Jamie Plemons was assessed three$20 overdraft fees for transactions that settled that day. Two were debit card transactions that were initiated on or prior to February 15, 2014. The positive funds were deducted immediately. The only reason any of the debit card transactions that settled on February 18 incurred overdraft fees was because of an $82.75 ATM withdrawal that Ms. Plemons made after the debit card transactions had been initiated.

As with Ms. Lloyd, she does not dispute that the credit union was within its rights to charge an overdraft fee for the $82.75 ATM transaction. The issue is with the fees on the previous debit card transactions.

Similar stories, over and over again

This pattern of events has been described repeatedly by litigants in excessive overdraft fee lawsuits. Successful lawsuits have led to awards or settlements involving credit unions, such as Digital Federal Credit Union and Landmark Credit Union. Banking giants like Wells Fargo and Bank of America have also been implicated.

$6.1 million in legal fees

The several law firms that represented the affected class of Navy Federal Credit Union members reportedly spent $143,000 and more than 780 hours on the case. The class of plaintiffs was large, including all of the credit union’s members who had been charged an overdraft fee between July 2012 and November 2017. Further, the issue of whether the language in the bank’s account agreements prohibited it from charging the overdraft fees on debit card transactions that were authorized against a customer’s positive balance was hotly litigated.

The settlement has no weight as legal precedent but is likely to influence subsequent settlement negotiations, especially in circumstances where credit union agreements contain language similar to the customer agreements at issue in Lloyd .

The CFPB seems a sadly toothless tiger today, but the private plaintiffs’ bar may have done the job of holding off this particular consumer financial abuse. What happens next? The invisible hand of the market is endlessly inventive. The law and watchful consumers persist, as well.


Credit Union Excessive Overdraft Fees Legal Help

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Posted by

In Maryland NFCU puts a 2 to 3 day hold on cash ATM deposits over 100 to 200 dollars. This has caused me several overdrafts. Now what has been NFCU in Harrisburg and Mechanicsburg Pennsylvania where there was a rather large navy base or operations center, but became a small community credit union, MN embers First Federal Credit Union, closed my account for $112 in overdraft fees . Plus I can't access my account online anymore to get copies of my bank statements which I need to follow up on the overdrafts and for legal purposes to do with something else. The checks that bounced were never paid, I called multiple times this past year to find out what other reciprocal ATMs there were in my area of Maryland a DC suburb because I couldn't find any place that accepts cash affiliated with Members 1st or with reciprocity except NFCU and was told there weren't any ATMs in my area, they were a small Community Credit Union, then I called back yet again and was told that that's not the case, I think the acronym used was they are a SEG type of Credit Union, something to do with employee-focused but I'm furious because while I'm not the best with money this is the first time my account ever overdraft Ed, often several times in one day because of holds. But also includes money from my income which is paid via the cash app card and they held that three days when I transferred from cash app to Members First better than pay huge ATM withdrawal fee. I never had a problem until I moved from Pennsylvania to Maryland and started using the NFCU ATM. It seems like a major scam to me and right now I'm up in the air if I should just pay the $112 I received a collection letter on today and be done with it or if I should fight it because while they've been great and worked with me in the past I feel something changed significantly including the quality of customer service, policy, and this has me Furious. An ATM kiosk with cameras everywhere in addition to the ATM itself, to hold cash deposited for 48 to 72 hours is ridiculous as well as a 3-day hold from something like cash app where obviously money is there on the spot

Posted by

I have been a member for well over 20 years, and I had the same problem of pending transaction and the money being taken out twice.

Posted by

"The CFPB seems a sadly toothless tiger" I found this true myself
and I counted on them doing their job..

Posted by

Been a member since 2017. I have noticed that when I spend, money , the POS are put up as pending. But that money is already gone. Then when the pendings hit, they take it out again. It feels like double jepordy.

Posted by

my credit union one charges me 22.00 for every over draft I make,for example,if I bought a pack of cigarettes for would cost me 33.13 for a pack that cost 11.13.

Posted by

yes i feel like this happen to me.

Posted by

This seems to be the trend at all banks. It is a disreputable and fraudulent action that the banks are committing so they can pad their profit margins.

I have the same issue with FLCU and I know others who bank there also face similar transactions by the bank

Posted by

I DON'T want to believe this CRAP about NFCU San Diego... I have been a Member of NFCU Washington DC since 1962 and the relationship for those 55+ years have been GREAT... Yes I had a Few Problems with them but it was my fault and they bent over backwards to make things RIGHT for me... It is IMO that the People involved in this Lawsuit are IGNORANT when it comes to Personal Finance and it was THEIR OWN FAULT for getting their accounts in trouble... Most people that use Debit & Credit Cards don't know what they are doing...!! Education in Personal Finance is SEVERELY LACKING in our USA Education System... I Educated myself from 1963 until 1980 by Self Teaching and a couple of Correspondence courses, Then went to a LOCAL Community College and got Associate Degrees in Banking & Finance and another in Business Administration from 1980 to 1985... Also since Fall 1985 I have still continued to gain greater experience in Personal Finance... LEARNING is a Lifelong Endeavor but you would not know it by READING JUNK like this LAWSUIT...~!!~

Posted by

My husband has been a member for 30 years or more
I've been a member since 2015
We've paid tons of overdraft fees


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