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Financial Services Law Insights and Observations

National bank settles overdraft fee MDL

Courts Settlement Overdraft Class Action MDL


On January 24, the U.S. District Court for the District of South Carolina entered final judgment for the approval of a $43 million settlement between a national bank and consumers to resolve multidistrict litigation (MDL) concerning overdraft charges. According to the settlement, since 2013, several groups of consumers have filed putative class action complaints against the bank in multiple jurisdictions alleging improper assessment and collection of overdraft fees, including claims that class members incurred overdraft fees as a result of the bank’s alleged practice of assessing fees based on an account’s available balance rather than its ledger balance. Other claims include allegations that the bank assessed overdraft fees for an ATM or one-time debit card transaction, assessed sustained overdraft fees, or assessed overdraft fees on ride-sharing transactions. In 2015 the Judicial Panel for Multi-District Litigation consolidated the actions for pretrial purposes.

In 2018, as previously covered by InfoBytes, the court dismissed one of the complaints in the MDL action, which alleged that the bank’s $20 overdraft fee is an interest charge on credit and therefore exceeds usury limits under the National Bank Act (NBA). The court noted that it had previously rejected a materially identical usury claim in December 2015 and that no new evidence or authority had been brought to light that would change its decision. In addition, the court concluded that “the law is still clear that sustained overdraft fees are not interest, and that assessing such fees cannot violate the usury provision of the NBA.” In 2019, the parties agreed to settle the action in its entirety, without any admission of liability by the bank. Under the terms of the settlement agreement, six classes of consumers will receive payouts or overdraft fee forgiveness, which will include $27 million “in the form of reductions to the outstanding balances of [class members] whose accounts were closed with amounts owed to the [bank].”