A Michigan-based credit union with branches in several states has paid $1.75 million to settle a class action lawsuit over allegations of overdraft fee abuses.

Union Federal Credit Union (UFCU), a financial institution operating in the St. Joseph region, denies any wrongdoing, but has agreed to pay compensation to members who claim they were wrongfully charged overdraft fees between Oct. 3, 2011, through Sept. 30, 2018. Class Members who are eligible to share in the settlement include any customer of UFCU who was charged an overdraft fee for the first time starting on Aug. 15, 2010.

The Cause of Action

The issue behind this class action lawsuit is one that has come up repeatedly in recent years. According to the Herald-Palladium, customers who are charged these overdraft fees say their ledger balance showed sufficient funds, but the “available balance” showed something else. This “available balance” often differs from a depositor’s actual balance, as the former is calculated based on impending debits that have not yet been processed.

One plaintiff says she was charged a total of $240 in a single day, despite having sufficient funds in her account. She says this constituted overdraft fee abuse because such charges were made when she had enough money to cover the transactions. The fees are “inconsistent with how UFCU describes the circumstances of when it assesses overdraft fees in other customer materials,” according to the plaintiff.

The Defendant Responds

According to UFCU, overdraft policies are “communicated to members” upon joining and whenever there are questions. In a statement, the defense said, “United denies that we did anything improper, we believe [the] settlement is in the best interests of all of our members.” They agreed to the settlement in order to avoid “the costs, distractions and risks of litigation,” WSJM reported.

Growing Litigation

This particular class action, originally filed in Nevada in September 2015, is only one of over a dozen such lawsuits that have been filed across the country in which bank and credit union depositors claim they were misled about overdraft policies. In April 2019, the nation’s largest credit union, Navy Federal, settled an overdraft fee class action for $24.5 million. UFCU, which has branches in six states, is the fifth-largest credit union in the country.

Were You Improperly Charged an Overdraft Fee?

Recent federal regulations prohibit banks and credit unions from charging overdraft fees unless a depositor has agreed in writing to participate in an overdraft protection program. Under the law, a financial institution must provide full, written disclosure on their overdraft policies, and cannot automatically sign customers up for “overdraft protection” unless they actively opt in to such a program.

Other ways consumers can protect themselves from excess overdraft fees is to link their primary account to a second account, such as a savings account, from which funds are transferred in the event of insufficient funds. There are fees for this service as well, but they are much lower (generally around $2 instead of $27-$30).

According to several bank overdraft fees lawsuits, banks would also continuously allow customers to overcharge their checking accounts regardless of insufficient funds. This resulted in additional overdraft fees as well.

If you were charged overdraft fees or NSF fees by your bank or credit union that you believe are improper for any reason, the attorneys who work with Top Class Actions are ready to investigate these fees on your behalf.

Learn more by filling out the form on this page.

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