Navy Federal Credit Union Resolves Insufficient Funds Fees Suit for $16M

UPDATE: November 2020, the Navy Federal NSF fees class action settlement is now open. Find out more by clicking here. 

The Navy Federal Credit Union agreed to establish a $16 million settlement fund to resolve allegations that its practice of assessing insufficient funds fees, also sometimes called nonsufficient funds, or NSF, fees, multiple times on members’ accounts for the same rejected transaction was wrongful and deceptive.

Plaintiff Ruby Lambert filed the proposed class action lawsuit in the United States District Court for the Eastern District of Virginia, Alexandria Division on Jan. 28, 2019 raising claims that the Navy Federal Credit Union assessed multiple insufficient funds fees on a single failed transaction when contractually, they were only permitted to assess one.

The court granted the credit union’s motion to dismiss the complaint, and Lambert appealed to the Fourth Circuit. The appellate court stayed the proceedings during mediation while the parties attempted to reach an agreement.

In her memorandum in support of the unopposed motion for preliminary approval of the class action settlement, Lambert stated that the settlement agreement reached with the credit union “was the result of hard-fought, arms-length negotiations between experienced counsel and facilitated by United States Magistrate Judge John F. Anderson.”

What Were the Alleged Wrongful Fees Assessed by the Navy Federal Credit Union?

According to the allegations in the lawsuit, the Navy Federal Credit Union would assess multiple insufficient funds fees in the amount of $29 each for a returned item every time it is re-presented for payment and the account doesn’t contain sufficient funds. The complaint stated that the insufficient funds fees could be assessed up to three times upon a merchant presenting the same failed transaction for payment again.

Lambert claims that the credit union’s practice breached its agreement with its members as it was only permitted to charge the fee once per returned item under her contract, despite the number of times a merchant re-presented the same rejected item for payment. The credit union denied that its assessment of insufficient funds fees was wrongful.

What Are the Settlement Terms?

Per the class action settlement, the credit union agreed to establish a settlement fund of $16 million to pay settlement Class Members’ payments, attorneys’ fees, costs, and any service award issued. Rather than submit a claim form to be compensated, the settlement agreement set up a distribution plan by which Class Members would receive their payment.

Those in the settlement Class would also benefit from injunctive relief. Under the class action settlement terms, the credit union agreed to change the language in its agreements with members to specify when re-presentment insufficient funds fees are assessed.

Lambert states in her motion for preliminary approval, “Plaintiff and her counsel expect that this revised disclosure will result in significant financial savings and will inure to the benefit of the Settlement Class, other Navy Federal Credit Union members, and future Navy Federal members who will be better able to understand when fees will be assessed to their accounts.”

The credit union will be implementing a Notice Program to ensure that the settlement Class Members are aware of the settlement and its terms and their right to opt-out. Members will be notified by email or postcard, and the long form notice will be available on the settlement website.

The memorandum in support of preliminary approval states, “In Class Counsel’s experience and informed judgment, the Settlement represents an excellent recovery for the Settlement Class, and the benefits of settling under the proposed terms outweigh the risks and uncertainties of continued litigation.”

What Is an Insufficient Funds Fee?

According to Forbes, banks with $1 billion or more in assets charged their customers a combined total of more than $11 billion in overdraft and insufficient funds fees in 2019.

Sometimes also referred to as “non-sufficient funds fees” or “NSFs,” insufficient funds fees may be charged when a checking account does not contain enough funds to cover a purchase.

Not to be confused with overdraft fees, insufficient funds fees are those imposed by a bank when it returns the presented payment and does not allow the transaction to go through. Overdraft fees are those charged by the bank when it allows payment to go through and covers the transaction, even though there are not sufficient funds in the account.

Allegations of banks abusing their NSF and overdraft fee practices have resulted in the recent filing of several class action lawsuits against various banking institutions.

The Navy Federal Credit Union case is Ruby Lambert et al. v. Navy Federal Credit Union, Case No. 1:19-cv-00103, in the United States District Court for the Eastern District of Virginia. 

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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