Digital Federal Credit Union has settled a class action lawsuit that alleged the $8.5 billion-asset credit union unjustly charged overdraft fees under a policy that was unclear.
Law360 reported the recent settlement by New England’s largest credit union for an undisclosed amount, but also said a motion for preliminary approval should be filed no later than the end of this month.
“I think it’s a good deal for the class members,” Richard D. McCune of McCune Wright Arevalo LLP told Law360, adding that he could not discuss any specifics.
The lawsuit was first brought forward in June of last year when Brandi Salls alleged DCU assessed multiple $30 overdraft fees when she in fact had sufficient funds in her account.
Salls alleged her account balance was artificially low not only because there was a hold placed on deposits into her account, but also because DCU subtracted pending transactions from the ledger balance. She claimed that DCU violated the opt-in contract with its customers because it promised to only assess overdraft fees when there were not sufficient funds in the account.
She also claimed that DCU breached the account agreement because the contract never stated that it would deduct pending debit card transactions for purposes of determining “sufficient funds” when assessing an overdraft fee.
The other allegations by Salls include breach of good faith, unjust enrichment/restitution, money had and received and violation of Regulation E, a Federal Reserve regulation that outlines steps consumers must follow in reporting errors and the steps a bank must take to provide recourse.
DCU pushed back, saying in a filing that Salls and those she represents waived any rights they may have had against the credit union when she entered into an agreement with DCU.
“Among other things, plaintiff knowingly and willingly caused her account to overdraft and incurred and paid fees assessed as a result of those overdrafts,” DCU stated in its filing.
Furthermore, DCU also alleged in its filing that the plaintiff and other parties she represented have “unclean hands.”
In response to Salls’ claim that DCU violated Reg E, DCU said it was “unintentional and resulted from a good faith effort notwithstanding the fact it maintained procedures reasonably adapted to avoid any such error.”
The judge in the case ruled in November that the case could move forward.
U.S. District Judge Timothy S. Hillman stated in his ruling that DCU did not properly define “available balance” and its meaning was therefore ambiguous to customers. Hillman also ruled that it was reasonable for customers to assume DCU would not use the ledger balance when calculating overdraft fees.
