NEWS: A New York federal credit union (FCU) is the latest to settle class action allegations over its overdraft/non-sufficient funds (NSF) fees and disclosures.
Empower FCU of Syracuse, NY, is required to pay about $5.2 million under a settlement recently approved by a New York federal trial court. (Empower FCU is not connected with Empower Credit Union of Wisconsin.) The FCU was sued in 2020 for violating the Reg. E and New York business statutes.
According to the plaintiffs, the FCU charged overdraft fees and NSF fees that were not permitted under its contracts with its members or Reg. E. They alleged that the FCU’s “opt-in form did not inform members that these fees were charged under the ‘available balance’ metric, rather than the ‘actual’ or ‘ledger’ balance metric.” The plaintiffs also alleged that the FCU’s “contracts did not authorize charging overdraft fees when the ledger or actual balance was positive.”
Under the terms of the settlement, the FCU must pay $2 million, of which 25% of the settlement fund will be allocated to class members’ Reg. E overdraft fees, 62.5% will go to class members’ New York law overdraft fees, and 12.5% will be allocated to class members’ breach of contract overdraft fees. The FCU is also required to pay $948,812 in attorney’s fees, plus costs, and $10,000 service awards to the two named plaintiffs.
Additionally, the FCU agreed to change its disclosures and will “forgive and release any claims it may have to collect any at-issue fees which were assessed by [defendant] but not collected and subsequently charged-off, totaling approximately $2,300,000.”
Credit unions are urged to connect with their bonding company for guidance to help them avoid being targeted in class-action NSF lawsuits. For example, TruStage (formerly CUNA Mutual) offers help to its bondholders on its “Overdraft – NSF Fee Litigation” page (login required).
Interested in reading more about the settlement? Click the links below to access:
- The settlement agreement;
- The plaintiff’s memorandum in support of its motion to approve the settlement; and
- The court’s order granting preliminary approval of the settlement.
League Legal Affairs Attorney’s Conference
Jul 25, 2023 9:00 AM – 3:00 PM, Madison WI – Information and Registration.
The League Legal Affairs Attorney’s Conference brings together attorneys from Wisconsin’s Credit Unions for a day of discussion around Compliance and Legal matters of importance to our members. Please invite your credit union attorney to attend!
- 9:00 am – 9:30 am
Welcome and Coffee
- 9:30 am – 10:15 am
Paul Guttormsson, Senior Vice President & General Counsel | The League
The New Reg. B Small Business Lending Rule
- 10:15 am – 10:30 am
Break
- 10:30 am – 12:00 pm
Tom Theune, Director | Office of Credit Unions, DFI
- 12:00 pm – 12:30 pm
Lunch
- 12:30 pm – 1:00 pm
John Engel, Director of Legal Affairs | The League
HELOC Compliance Tensions
- 1:00 pm – 2:00 pm
Melissa Caulum Williams | Senior Counsel | Husch Blackwell
HR Compliance Issues
- 2:00 pm – 2:30 pm
Kim Hoppe, Compliance Resource Analyst | The League
Remote Online Notarization
- 2:30 pm – 3:00 pm
Roundtable Discussion Adjourn