Parties file unopposed settlement requiring credit union to pay $16 million to resolve insufficient funds fee lawsuit

Courts Fees Overdraft Class Action Settlement

On October 21, class members filed an unopposed motion for preliminary approval of a class action settlement in the U.S. District Court for the Eastern District of Virginia, which would—if approved—require a national credit union to establish a $16 million common fund, pay all settlement administration costs, and modify its account agreement policy to clarify how it assesses insufficient funds fees. The named plaintiff filed a lawsuit against the credit union alleging that its fee-assessment practices for insufficient funds violated her agreement with the credit union. According to the named plaintiff, the credit union charged multiple $29 insufficient funds fees (NSF fees) per transaction, even though she argued her contract only permitted the credit union to charge one NSF fee per transaction, “regardless of how many times the merchant re-presents the debit item or check for payment.” The credit union, however, denied that its NSF fee assessment practices violated the law or were in breach of member contracts. While the court originally dismissed the suit for failure to state a claim, on appeal, the U.S. Court of Appeals for the Fourth Circuit stayed further proceedings to allow the parties to mediate an agreement. If approved, class members will not be required to file claims to receive settlement benefits.