At least four California credit unions have been hit with overdraft lawsuits so far with allegations that fees were not assessed properly.

Credit unions typically determine overdraft fees based on available balance instead of actual balance at the time when the transaction cleared the customer’s account. Those who have joined a credit union overdraft fee class action lawsuit allege that practice is unfair.

Credit union sources claim that their overdraft program is a reasonable practice that is legal. However, credit union overdraft fee class action lawsuits argue that customers were not clearly communicated with about how overdraft fees were assessed, which could possibly award class members a substantial settlement.

Credit Union Overdraft Fee Practices

Overdraft fee class action lawsuits claim that credit unions do not fully inform their customers of how fees are calculated. Plaintiffs allege credit union overdraft programs cause confusion due to the fact that assessing a fee on the available balance may cause an overdraft fee to occur even if the actual balance did not go negative.

The class action lawsuits also allege that credit union members feel misled when they are not informed of their available balance prior to transactions that lead to overdraft fees. In addition, some costumers claim that their credit union intentionally processed their transactions out of order as a way to charge an overdraft fee.

Overdraft fees are usually imposed when a bank or credit union is required to move money into an account in order to pay for a transaction. Since 2010, financial institutions are not legally allowed to charge an overdraft fee unless the customer has opted-in to the overdraft protection or an overdraft coverage program.

Credit Union Class Action Lawsuits

In recent years, credit unions were quick to settle a wave of ATM lawsuits, but it’s unclear what direction the upcoming credit union overdraft fee class action lawsuits will take. At least one credit union has settled an overdraft lawsuit but other credit unions may choose to fight them. 

Some credit union consultants believe taking an overdraft fee class action lawsuit to a jury trial is a risky endeavor. Sources state that some of the larger credit unions could be facing tens of millions of dollars in potential plaintiff awards.

Credit unions have been an attractive option for customers for years as they are often promised lower fees than banks. However, in recent years they have been accused of raising overdraft fees and other charges.

Some of the top U.S. credit unions include: Navy Federal Credit Union, Pentagon Federal Credit Union, State Employees’ Credit Union, Alliant CU, Boeing Employees Credit Union, First Technology FCU, Star One CU and San Diego County Credit Union. These are just a few of the largest credit unions, there are thousands more across the U.S.

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