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Financial Services Law Insights and Observations

District Court sends overdraft fee suit to arbitration

Courts Overdraft Arbitration NSF Fees Consumer Finance Class Action


On November 16, the U.S. District Court for the District of Massachusetts granted a defendant’s motion to compel arbitration regarding claims that consumers are charged significant overdraft or non-sufficient funds fees on bank accounts linked to discount cards issued by the gas-discount company. According to the plaintiff’s putative class action suit, the defendant advertises fuel discounts through a mobile app and payment card system while claiming that its service acts “like a debit card” by “‘effortlessly deduct[ing]’ funds from linked checking accounts at the time of purchase[.].” While these payments and discounts are represented as being “automatically applied,” the plaintiff alleged that paying with the discount card results in significant processing delays. These delays, the plaintiff contended, cause users to run the risk of having insufficient fees in their checking accounts before the payment is processed, thus resulting in overdraft fees. Additionally, the plaintiff claimed that the defendant does not verify whether a consumer has sufficient funds in the checking account before payments are withdrawn. The defendant moved to compel arbitration, or in the alternative, moved to dismiss the complaint, claiming that during the sign-up process, the plaintiff was presented with terms and conditions that explicitly require users to arbitrate any disputes, claims, or controversies. Moreover, the defendant argued that users cannot sign up for the program unless they first check a button that says “I agree” with the terms of use. While the parties agreed that the plaintiff was presented at a minimum a hyperlink to the terms and conditions, they disputed whether the sign-up process required the plaintiff to affirmatively assent to them. According to the plaintiff, there was no such checkbox button when he signed up for the program.

The court disagreed, ruling that the plaintiff had notice of and agreed to terms and conditions that included an arbitration clause and class action waiver. According to the court, the defendant adequately showed that the checkbox button was part of the process when the plaintiff signed up and that the defendant obtained his affirmative asset to the agreement. Further, the plaintiff failed to support his claim with any specific evidence that the checkbox button may not have been there during the sign-up process, the court maintained.