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Financial Services Law Insights and Observations

District Court preliminarily approves autopay class action settlement

Courts Class Action Autopay State Issues

Courts

On June 28, the U.S. District Court for the District of New Jersey granted preliminary approval of a settlement in a class action against a national bank alleging breach of contract and violations of the New Jersey Consumer Fraud Act by, among other things, misleading cardholders about their autopay options. According to the plaintiff’s memorandum of law requesting preliminary approval of the class action settlement, the bank presented cardholders with several payment options when setting up automatic online monthly payments. The plaintiff filed a putative class action alleging the “Amount Due” option, which he selected, “was misleading since customers who selected it likely intended to pay the total ‘amount due’ each month, leaving no balance to carry over and incur interest, but instead found themselves paying only the minimum amount due, thereby leaving a balance that was subject to interest charges.” This option, the plaintiff contended, was duplicative of the “Minimum Amount Due” option, which allowed cardholders to pay the minimum amount owed on their most recent credit card statement and carry the remaining balance (thus, incurring interest) to the following month. Plaintiff claimed this created potential confusion for cardholders “who intended to pay off their entire monthly credit card balance and instead ended up paying the minimum amount and accruing interest they were trying to avoid.” The parties agreed to stay the case pending mediation and reached a settlement, under which the bank agreed to pay $5.95 million to establish a settlement fund. The fund will cover approximately 100,000 class members who enrolled in the bank’s eBill autopay, “selected the ‘Amount Due’ payment option before March 7, 2021,” and “switched their payment option from ‘Amount Due’ to ‘Account Balance’ after making an ‘Amount Due’ payment and being assessed interest” during the identified time period.