Navy Federal Settles Debit Card Fee Lawsuit for $5.5 Million
An estimated four million Navy Federal members are improperly assessed an International Service Fee for debit card purchases.
The $170 billion Navy Federal Credit Union in Vienna, Va., has settled a class action lawsuit for $5.5 million, which will reimburse debit card fees for an estimated four million members, according to court filings at the U.S. District Court in Alexandria, Va.
Federal Magistrate Judge Lindsey R. Vaala is expected to grant final approval of the settlement in May.
The lawsuit was brought by Navy Federal members Siobhan Morrow, Tracee LeFlore and Maria Hart in 2021. They were each charged a 1% International Service Assessment (ISA) fee after making online debit purchases from merchants based overseas.
In their lawsuit, the three members claimed the fee’s assessment was deceptive, unfair and breached contractual promises because Navy Federal’s account documents indicate the ISA fees will only be assessed when the accountholder uses his or her debit card while in a foreign nation. Morrow, LeFlore and Hart said they made the debit card purchases from their U.S. homes and should not have been charged the ISA fee.
Navy Federal, which unsuccessfully attempted to have the lawsuit dismissed, argued the lawsuit was fatally flawed for several reasons, including that the credit union did not breach its contractual obligation because the account documents authorize and disclose the ISA fees.
Although Navy Federal disputes the lawsuit’s allegations and denies any wrongdoing or liability, it decided to settle the case to avoid additional expenses, inconvenience and distractions of the litigation.
The $5.5 million will be used to reimburse an estimated four million Navy Federal members who were assessed and ISA fee for an online overseas purchase they made while they were in the U.S. from Aug. 9, 2016, to March 24, 2023. Navy Federal currently serves more than 13 million members.
According to the proposed settlement, members will receive $4 for each valid claim they submit. Members will receive notices about the settlement via email or direct mail. If there are not enough funds in the net settlement fund, each payment will be reduced pro rata or by dividing the total amount in the net settlement fund by the number of total valid claims.
The Navy Federal members who filed the lawsuit may each be paid a service award of up to $5,000 for their work during the legal proceedings. Their lawyers are expected to be paid $2 million.