The conflict surrounding overdraft practices in the credit union industry appears to be growing, with at least 17 credit unions in 11 states and the District of Columbia now battling class action suits over how they handle accounts with insufficient funds.
At the end of 2015, at least 13 credit unions were embroiled in suits alleging, among other things, that they charged overdraft fees based on members' available balances rather than actual balances and had opt-in agreements that were inconsistent with other disclosure materials. Since January, at least four more credit unions have been targeted in suits with similar allegations.
A review of 17 cases brought before federal courts since September 2015 showed the same two firms – the Redlands, Calif.-based McCune Wright and Santa Monica, Calif.-based The Kick Law Firm – represent all the plaintiffs. Law firms in the plaintiffs' home states are also involved, according to court documents.
Judges have since moved at least four cases to California state court.
"That's really a procedural thing," Stuart Richter, a partner at Katten Muchin Rosenman, which represents several of the defendants, said. "California has a statute that is the basis of some of the claims that are alleged in those cases. There's a Ninth Circuit law out in California that says if you file a claim under that statute, you can't say that it's truly a federal question. That was the basis of the remand."
For all of the cases, class certification will be a turning point, added Michael Bell, an attorney at Howard & Howard in Royal Oak, Mich. Bell's firm also represents some of the defendants.
"[Class certification] takes a case from one plaintiff to who knows how many plaintiffs," he explained.
The damages in turn could be much higher as well, he added.
"That changes the face of the case," he said.
However, that point could be several weeks or months away, and several credit unions are already a year into their cases. In the meantime, Richter added, credit unions should review their overdraft disclosures and practices.
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