Arizona & New York Credit Unions Settle OD/NSF Lawsuits for $11 Million

The $8.3 billion Desert Financial Credit Union in Phoenix, Ariz., and the $3.2 billion Empower Federal Credit Union in Syracuse, N.Y., have settled overdraft/non-sufficient funds (OD/NSF) class action lawsuits for $11 million. What’s more, members recently filed four OD/NSF lawsuits that are pending in federal courts against the $166 billion Navy Federal Credit Union in Vienna, Va., the $494 million Advantage Federal Credit Union in Rochester, N.Y., the $430 million Credit Union of New Jersey in Ewing, and the $609 million R.I.A. Federal Credit Union in Bettendorf, Iowa.

According to court filings from Arizona’s Superior Court for Maricopa County, Desert Financial member Bernadette Dominque alleged the credit union incorrectly charged overdraft fees between June 1, 2014 and Nov. 1, 2017, on non-PIN debit card transactions that authorized against a sufficient available balance and settled against an insufficient available balance.

Throughout a two-year court battle, Desert Financial has disputed these allegations and argued that its overdraft fees were charges permitted by its terms and conditions and applicable laws. Although the credit union denied any wrongdoing or liability, it decided to settle the lawsuit for $6 million to avoid additional expenses from future legal proceedings, according to court documents.

Out of that $6 million settlement fund, Dominque is expected to receive a $20,000 service award, and her lawyers, Sophia Goren Gold of Berkeley, Calif., and Taras Kick of Los Angeles, are expected to receive $2 million, according to court filings.

The approximate $4 million balance of the settlement funds will be distributed to Desert Financial members who were charged the OD fees.

Maricopa County Superior Court Judge Timothy J. Thomason is expected to approve the settlement on Sept. 7.

Last month, Federal Judge David N. Hurd for the Northern District of New York in Syracuse, gave a final approval for a $5.1 million settlement agreement between Empower and Danielle Wellington, who alleged that she and other members were charged OD/NSF fees from April 2015 to September 2021, which violated Regulation E. According to the final settlement, Empower’s opt-in form allegedly did not inform members that these fees were charged under the “available balance” metric, rather than the “actual” or “ledger” balance metric, which violated Regulation E.

Empower has disputed these allegations throughout the legal proceedings.

The value of the proposed settlement is $5,185,583, which includes three parts.

First, Empower will pay $2 million in cash to the settlement fund. Second, the credit union has agreed to change its disclosures. In September 2021, Empower stopped charging overdraft fees on Regulation E transactions until such time as the members were opted-in utilizing the current opt-in form that specifically discloses the credit union’s usage of the available balance. It’s estimated that this change will result in $885,583 in reduced overdraft fees for Empower members. Third, the credit union also has agreed to forgive and release any claims it may have to collect any at-issue fees, which were assessed by the credit union but not collected and subsequently charged off, totaling approximately $2.3 million, according to the final settlement agreement.

Wellington and a second plaintiff, Dianna Conley, will each receive a service award of $10,000. Wellington’s lawyers, Elaine S. Kusel of Newark, N.J., and Richard D. McCune of Ontario, Calif., and Conley’s lawyer, Joseph I. Marchese of New York, will receive $948,812, the settlement agreement showed.

On July 21, Navy Federal member Andrew King of Long Beach, Calif., filed a lawsuit in U.S. District Court in Los Angeles alleging that Navy Federal’s members are routinely charged “returned checks, deposited or cashed” fees on deposits that accountholders attempt to make into their Navy Federal accounts, but which fail because they could not be processed against the originator’s account. This allegedly occurs even when an attempted deposit never results in the accountholder accessing or having access to the amount of the attempted deposit. The lawsuit claimed the fees violate California law.

King’s lawsuit was originally filed in California state court in June, but Navy Federal later moved the lawsuit to federal court.

“NFCU denies the allegations in the complaint, denies that plaintiff has stated any claim for which relief may be granted, and denies that plaintiff has suffered damages in any manner whatsoever,” Navy Federal said in its court filing.

Advantage FCU members, Susanne Fracchia of Rochester and Genady Maltsev of Henrietta, filed an OD class action civil lawsuit in U.S. District Court in Rochester in June.

They alleged Advantage routinely assesses members $36 fees and $34 OD fees on transactions that did not actually overdraw checking accounts, which violates New York’s general business law.

Advantage has not yet responded to the lawsuit that was filed in June.

The Credit Union of New Jersey (CUNJ) is facing an OD class action lawsuit from one of its members, Myasia Lopez of Riverside.

Her lawsuit, filed in U.S. District Court in Trenton in May, alleged that CUNJ’s overdraft practices are unfair and deceptive because it assesses overdraft fees even when its members’ accounts are not overdrawn, violating federal and state law.

CUNJ’s attorney, however, is looking to dismiss the lawsuit.

In its court filing, the credit union contended Lopez implausibly alleges that CUNJ breached its membership agreement and violated state law despite the fact that she explicitly agreed the credit union could take the actions she now asserts are impermissible.

“Compounding this error, Plaintiff seeks relief under a federal regulation that provides her no private right of action,” CUNJ’s attorney wrote in a July 24 court filing.

R.I.A. Federal Credit Union is asking a federal judge in Rock Island, Ill., to dismiss an OD class action lawsuit brought by member Katherine Schlichting of Iowa.

She claimed that the credit union routinely assesses two or more fees on a single transaction, misrepresenting its fee practices including in the credit union’s “take-it-or-leave-it form adhesion contract,” which Schlichting alleged violate the law of Illinois where the credit union lists its principal place of business in Rock Island. According to the NCUA, however, the credit union is headquartered in Bettendorf, Iowa.

In its court filing, R.I.A. argued its fee-related contractual disclosures, assessment and collection practices underlying Schlichting’s multiple fee claim are “expressly contemplated by the plain and unambiguous language of the contractual terms governing plaintiff’s account with R.I.A.”

“Consequently, plaintiff’s class action complaint should be dismissed,” R.I.A. said.