Digital FCU Battles Overdraft Lawsuit
A Massachusetts woman says fees were unfair and improperly disclosed.
The credit union ($8.5 billion in assets, 780,664 members) denied the charges this month in a filing in U.S. District Court in Boston.
“DCU has and always will act in the best interests of our members and intends to take whatever action is necessary to defend against these claims,” Digital spokesman John LaHair said Wednesday.
LaHair declined further comment, but the answer filed by lawyers for the credit union in U.S. District Court in Boston Nov. 20 said one of the reasons the member is not entitled to relief is that she waived any rights against Digital because she “knowingly and willingly caused her account to overdraft.”
And Digital says that if there were violations of Regulation E, they were “unintentional and resulted from a good faith effort notwithstanding the fact it maintained procedures reasonably adapted to avoid any such error.”
Lawyers for the woman, Brandi Salls, are seeking to have the case tried as a class action.
The suit filed June 15 alleges Digital assesses overdraft fees “based on an artificial and hypothetical internal calculation by which it deducts holds it has placed on either pending debit card transactions or deposits, rather than use the actual money in the account as required by the Opt-In Contract.”
The suit also claims Digital violated federal consumer protection laws. It says inaccuracies in Digital’s description of its method of calculating overdraft fees didn’t meet the disclosure requirements of Regulation E of the Electronic Fund Transfer Act.
In 2009, the Federal Reserve Board amended Regulation E to prohibit institutions from charging overdraft fees for ATM and one-time debit card transactions, unless the consumer opts in or affirmatively consents to the institution’s overdraft services. The regulation also sets standards for clear and proper disclosures.
The suit alleges both credit unions and banks set overdraft fees at a high cost that is “usually unfairly punitive.” It says overdraft fees fall most heavily on the young, the poor and minorities.
“As a result of banks and credit unions taking advantage of millions of customers through the unfair practice of charging overdraft fees through methodologies that maximize the possible number of expensive overdraft fees to be charged,” the suit says.
A Nov. 8 ruling by U.S. District Judge Timothy S. Hillman allowed the suit to proceed based on its allegations of breach of the opt-in contract, breach of the account agreement and breach of the implied covenant of good faith and fair dealing. The allegation of violations of federal consumer protections also survived for fees charged after June 14, 2017. He tossed out claims related allegations of “unjust enrichment.”
Salls is represented by Christine M. Craig and Sean T. O’Connell of the Shaheen & Gordon law firm in Dover, N.H.
Digital is represented by Stuart M. Richter and Andrew J. Demko of the Katten Muchin Rosenman law firm in Los Angeles. Local counsel is John A. Mavricos of Christopher, Hays, Wojcik & Mavricos in Worcester, Mass.