NFCU Sued for Charging International Transaction Fee for Online Purchase 

A class action lawsuit was filed against Navy Federal Credit Union challenging its alleged practice of charging international service fees for purchases made online within the United States from international vendors.

The action was filed against the Virginia-based credit union in the Southern District of California on Aug. 21, 2020, arising from an online transaction allegedly made by lead plaintiff Siobhan Morrow. She said she used her NFCU checking account while at home in San Diego to make a purchase from an online retailer based in Cyprus. Morrow claims she wasn’t aware the company was located outside the U.S. since the information wasn’t disclosed openly on the website.

As a result of making the online purchase, Morrow claims she subsequently incurred an international transaction fee of $1.38 — 1% of the $137.56 total purchase amount. She argues that absent a provision specifically authorizing an international transaction fee for online purchases, the practice is otherwise prohibited and the credit union breached its contractual agreement by applying it.

Although it’s not uncommon to incur international transaction fees between 1% and 3% for purchases made with a credit card when traveling abroad, Morrow states that NFCU’s provisions exclude any mention of fees for purchases made over the internet by someone located in the U.S. She argues that the language of NFCU’s debit card disclosure document only addresses international purchases made in person while overseas.

Lawsuit Alleges Failure to Disclose Fees Makes Bank Customers “Unwitting Victims”

Without proper notice that they might incur international transaction fees, Morrow maintains that customers can “find themselves unwitting victims of bank fees to which they did not knowingly subscribe.” In fact, a 2019 Wallethub survey revealed that 89% of consumers aren’t aware that an international transaction fee can be applied for purchases made in the U.S. from international merchants.

As stated in the complaint, NFCU’s terms specify that “transactions made in foreign countries will be charged 1.0% of the transaction amount.” The lawsuit declares that there is a clear distinction between transactions “made” in and those that are “processed” in foreign countries, exempting internet purchases made in the U.S. from international transaction fees.

The complaint asserts that while international transaction fees might “appear at first to be a small, negligible amount” they “have resulted in tremendous harm to consumers.” Morrow alleges that NFCU was opportunistic and failed to act in good faith by taking advantage of the contract’s silence concerning fees imposed for online transactions with international merchants.

What Is an International Transaction Fee?

Sometimes also called a foreign transaction fee, an international transaction fee can be imposed on bank customers who make purchases outside the country. Investopedia explains that the total fee is usually up to 3% and comprises two parts — a fee charged by the payment processor and another fee charged by the card-issuing bank.

Other International Transaction Fee Litigation

The NFCU isn’t the first financial institution alleged to have failed to disclose pertinent information to customers about international fees. Class action attorneys continue to investigate the practices of a number of banks that impose hidden, inflated, or undisclosed bank fees.

As referenced in the NFCU lawsuit, harm to bank customers has resulted in extensive litigation nationwide. Notably, in 2001, a multidistrict litigation was commenced in the Southern District of New York by VISA and MasterCard cardholders, alleging that the credit card agreements poorly disclosed international transaction fees. It resulted in a settlement of $336 million dispersed to 10 million customers.

A recently proposed class action lawsuit was filed against Bank of America for allegedly inflating international transaction fees unlawfully. A class action was also commenced against Citibank in February 2019 concerning the issue of foreign transaction fees incurred in making online purchases from international sellers.

The Navy Federal Credit Union Class Action Lawsuit is Siobhan Morrow, et al. v. Navy Federal Credit Union, Case No. 3:20-cv-1636-LAB-JLB, in the U.S. District Court for the Southern District of California.

Join a Free Foreign Transaction Fees Class Action Lawsuit Investigation

If you were charged a foreign transaction fee on a debit card or credit card purchase made on a foreign website, you may qualify to join this foreign transaction fees class action lawsuit investigation.

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This article is not legal advice. It is presented
for informational purposes only.