Jessica M. Semins  |  November 19, 2020

Category: Fees

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Insufficient funds fees can add up quickly.

Alliant Credit Union argued to an Illinois federal judge that a lawsuit alleging wrongful assessment of insufficient funds, or NSF, fees should be permanently dismissed because a new complaint raises the same legal theories which had previously failed.

Arguing that the proposed class action lawsuit is a “meritless vendetta against Alliant,” the Chicago-based credit union asserts in its motion to dismiss filed on Nov. 9, 2020, in the United States District Court for the Northern District of Illinois that plaintiff Alicia M. Page failed to change the legal theories on which her claims were based in her amended complaint.

Arising from two fees Page says she incurred in 2017, she commenced the action in the District of New Jersey. The case joined two other plaintiffs, Carmel Cooper and Cindy Muniz, whose claims were ultimately arbitrated. Having filed two complaints in the New Jersey federal court, the venue dismissed Page’s case for lack of jurisdiction in June 2019. Page refiled the suit in the Illinois federal court in September 2019.

In the suit, Page asserts that Alliant used an “artificial available balance” to impose insufficient funds fees without disclosing the practice in its contract. The court determined in August 2020 that Alliant’s membership agreement was “unambiguous,” but allowed Page to file an amended complaint.

Alliant contended that the arguments raised in the first amended complaint filed in September 2020 mirror the ones the court previously dismissed, stating, “Plaintiff has been given multiple opportunities to plead a viable case and has failed at every turn.”

Alliant argues, “Because the First Amended Complaint is little more than the original Complaint in a slightly different wrapper, the Court should dismiss it too—this time with prejudice.”

What Were the Insufficient Funds Fees Alleged?

In the amended complaint, Page claims that Alliant had engaged in a practice of charging overdraft fees on “artificial available balances” instead of ledger balances, without disclosing how the fees would be assessed in the membership agreement. She also purports that the credit union assessed insufficient funds fees multiple times, in violation of the agreement entered into with its members and Regulation E, alleging breach of contract, deceptive business practices, unjust enrichment, and consumer fraud.

A $25 fee would allegedly be charged by Alliant when payment was first attempted on accounts that it deemed had insufficient balances, and each subsequent time it was presented for processing — even if the customer did not request reprocessing.

According to Page, Alliant’s contract stated that “a charge” could be applied if there were insufficient funds in the account to cover a transaction. “’A charge’ is singular and does not mean several charges or multiple charges,” Page maintains in her amended complaint.

Alliant’s agreement was silent as to their “abusive practice” of assessing multiple fees for the same item, Paige alleged, citing to a list of other banks that expressly disclose in their contracts their participation in the practice. Although Alliant argued that their agreement with its members was “unambiguous,” Page asserted that she had not known that Alliant changed their account contracts in October 2019 to clearly disclose to members that they could be charged multiple fees for the same transaction and fees on overdrawn accounts any number of times.

Insufficient funds fees can add up quickly.Can Banks and Credit Unions Charge Insufficient Funds Fees?

Insufficient funds fees are often charged by banks or credit unions when an account does not have enough funds to cover the transaction and a payment is returned. Similarly, overdraft fees may be charged when a bank allows a transaction to go through even though there are insufficient funds in the account.

Although insufficient funds fees are legally permissible, they must be clearly outlined in the bank’s customer contract or credit union membership agreement.

According to the Consumer Financial Protection Bureau, overdraft and insufficient funds fees represent the biggest costs associated with a checking account, totaling approximately $17 billion a year.

Not to be confused with overdraft fees, insufficient funds fees are charged when a transaction is rejected when there are not enough funds in the account. Overdraft fees are incurred when the bank allows a transaction to go through even if it will overdraw the account.

Banks and credit unions must obtain consent from consumers to provide overdraft protection on their accounts, which can be revoked at any time. When a consumer “opts-in,” to overdraft protection, the financial institution is prevented from assessing an overdraft fee on a consumer’s account unless they’ve expressly consented to allow the bank to charge a fee — usually around $35 — to cover the transaction. Regardless of whether a consumer “opted in” to an overdraft protection program, they may still be subject to insufficient funds fees.

The Insufficient Funds Fees Lawsuit is Page et al. v. Alliant Credit Union et al., Case No. 1:19-cv-05965, in the United States District Court for the Northern District of Illinois.

Join a Free NSF Fee Class Action Lawsuit Investigation

You may qualify to join this NSF fee class action lawsuit investigation if you were unfairly charged NSF fees by one of these banks:

  • Bancfirst
  • Bell Bank
  • Busey Bank
  • Center Bank
  • CenterState Bank
  • Flagstar Bank
  • Glacier Bank Wings Federal Credit Union
  • Midwest One
  • NBT Bank

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