A California woman has filed a class action lawsuit against Los Angeles Federal Credit Union (LAFCU), alleging the credit union failed to inform customers about its overdraft fees assessment.

Plaintiff Mary G. has brought forth allegations that LAFCU did not include the actual overdraft fee amount on member opt-in forms, thereby failing to secure proper customer consent regarding overdraft protection.

The overdraft fee lawsuit further alleges that the credit union violated federal regulations by omitting overdraft fee amounts from their opt-in form, instead posting them in a separate document on their website, a violation of Federal Reserve opt-in rules.  The implication is that LAFCU intentionally withheld this information from its opt-in form so as to create more overdraft fees.

“The regulations are so clear as to what has to be in that opt-in form,” Mary’s attorney stated. “I don’t have an explanation for why they decided to change the model form, but they clearly did. We have lots of other concerns about what banks and credit unions are doing, but this is the first time we’ve come across this.”

The LAFCU overdraft lawsuit also claims that the credit union assessed overdraft fees based on available balances rather than actual balances. All financial institutions must choose a method by which they process debit card transactions, and LAFCU’s method—justified by assuring that consumers’ most important payments are paid first—is not uncommon, even though it causes low-balance accounts to go negative more quickly.

Other financial institutions process transactions in the order received, others in real-time, and others process the smallest transactions first. For credit unions, this issue is partially covered by Reg. E. As of July 2010, credit unions were no longer allowed to charge an overdraft fee on non-recurring debit card transactions unless members opted in to overdraft protection programs.

So, there are now two kinds of members. Those who have opted in have transactions in excess of their balances approved and subsequently pay an overdraft fee. Those who have opted out either have transactions in excess of their balances declined, or in certain circumstances, due to the electronic payments system, still get those transactions approved and pay no overdraft fee.

Mary’s complaint is seeking class action status and the potential class includes current and former LAFCU customers who incurred overdraft fees for ATM and nonrecurring debit card transactions on an LAFCU account since mid- Sept. 2011 to now.

Credit Union Overdraft Fees Class Action Lawsuits

LAFCU is not alone facing such allegations, as several other credit unions and banks have also been sued recently in similar overdraft protection cases. It is not clear what approach the credit unions will take to address these and potential future overdraft fee class action lawsuits.

In the past, credit unions were quick to settle a wave of ATM lawsuits, but they may decide to fight the upcoming overdraft fee lawsuits.

Some of the top U.S. credit unions include:

• The Golden 1 Credit Union, Sacramento, CA
• Alliant Credit Union, Chicago, IL
• Security Service Federal Credit Union, San Antonio, TX
• Star One Credit Union, Sunnyvale, CA
• First Technology Federal Credit Union, Mountain View, CA

The LAFCU Overdraft Class Action Lawsuit is Mary G. v. Los Angeles Federal Credit Union et al, Case No. 2:15-cv-07266 in the California Central District Court.

UPDATE: The Los Angeles Federal Credit Union overdraft fees class action settlement is now open. Click here to learn more.

ATTORNEY ADVERTISING

The choice of a lawyer is an important decision and should not be based solely on advertisements.