CUNA Mutual Group issued a Risk Alert stating that “after a number of successful class action lawsuits against banks, consumers may be targeting credit unions alleging abusive overdraft practices. The lawsuits generally allege financial institutions reorder, or batch, debit transactions so the highest dollar transactions are processed first. This practice typically increases the number of overdrafts in the account which results in increased fees charged to consumers.”
The Alert details went on to say that plaintiffs in class action lawsuits against banks typically allege the institutions reorder, or batch, debit transactions (ATM and debit card transactions) so the highest dollar transactions are processed first. The complaints allege this practice is unfair and resulted in illegal assessment and collection of excessive overdraft fees.
Over the last year, a number of banks have entered into multi-million dollar settlements with their account holders to end the lawsuits, including Bank of America ($410 million), JP Morgan Chase ($110 million), and Fifth Third Bank ($9.5 million) to name a few. In a similar class action lawsuit filed against Wells Fargo, the court ordered the bank to pay $203 million to its account holders.
It has been reported that a non-profit group, classaction.org, has been advertising in various media soliciting individuals who believe they have been unfairly assessed overdraft fees by their financial institution. The group has been successful in finding plaintiffs for several of the class action lawsuits filed against banks.
Members of several credit unions across the country have allegedly filed grievances with classaction.org, claiming their credit unions unfairly charged overdraft fees. It is not known whether the credit unions engage in the practice or reordering, or batching, debit transactions.
To read the full CUNA Mutual Risk Alert and for risk mitigation tactics click here.