A federal judge ruled that a proposed class action lawsuit alleging Digital Federal Credit Union has confusing credit union overdraft policies may move forward.

According to the lawsuit, Digital Federal Credit Union’s opt-in contract says that “[a]n overdraft occurs when you do not have enough money in your account to cover a transaction, but we pay it anyway.”

The plaintiff alleges that Digital Federal Credit Union allegedly assesses overdraft fees based not on the actual money that is in the account, but on an artificial balance concluded by deducting holds it has placed on pending debit card transactions and pending deposits.

U.S. District Judge Timothy S. Hillman of Massachusetts federal court wrote that “The overdraft disclosure does not provide any information clarifying that ‘enough money’ is to be construed as ‘available balance.’ Therefore I find that a reasonable person could construe ‘enough money’ to mean ‘ledger balance.’”

The judge also ruled that the lawsuit cannot address claims under the Electronic Fund Transfers Act for any occurrences that were documented more than a year before the lawsuit was filed. The judge additionally tossed two claims that sought injunctive relief.

Attempt to Dismiss Credit Union Overdraft Lawsuit

In September, Digital Federal Credit Union filed a motion to dismiss the lawsuit, insisting that its opt-in agreement and other customer outlines fully explained the financial institution’s overdraft policies and terms. The credit union said the term “available balance” was “understood to mean the money in an account minus holds placed on funds to account for uncollected deposits and for pending debit transactions.”

Judge Hillman found it unacceptable that customers would automatically know the full definition of the terms without being provided a full explanation. He said he found that the term “available balance” was ambiguous and refused to dismiss the case.

The lead plaintiff in the credit union overdraft lawsuit alleges she was assessed overdraft fees when she had plenty of money in her checking account.

She said on Dec. 18, 2014 when she had $318.17 in her checking account, she purchased something with her debit card on amazon.com for a total of $37.18, which left her with a balance of $311.55. The credit union overdraft fee of $30 was assessed to her account for no apparent reason, she says.

She said on Dec. 19, 2014 when she had $281.55 in her checking account, she made a debit card purchase of $27.97. Despite still having an account balance of $253.58, she says she was assessed another credit union overdraft fee.

By allegedly assessing and taking improper overdraft fees, the Digital Federal Credit Union further reduces the available funds in the account. As a result, transactions that would otherwise not result in an overdraft become transactions that cause the further assessment of overdraft fees.

Boasting 700,000 members, Digital Federal Credit Union holds more than $8 billion in assets and is the largest credit union in the New England area.

The Credit Union Overdraft Lawsuit is Salls v. Digital Federal Credit Union, Case No. 4:18-cv-11262, in the U.S. District Court for the District of Massachusetts.

You may have a legal claim if your were charged excessive overdraft fees by one of these banks or credit unions:

• Alliant Credit Union
• Astoria Bank
• BECU (Boeing Employees Credit Union)
• Nationwide
• Pacific Western
• Patelco Credit Union
• State Employees Federal Credit Union (SEFCU – New York)
• Sterling Bank
• Educational Employees Credit Union (California)

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