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CFCU Overdraft and Overdraft Transfer Fees Class Action

This class action protests two things: First, the complaint claims that CFCU Community Credit Union assesses overdraft (OD) fees on accounts that are not actually overdrawn. Second, it claims that it assesses overdraft transfer (ODT) fees on transfers made to avoid overdrafts, even when they do not actually avoid the overdraft, so that accountholders end up paying both fees on a single transaction. The complaint alleges that these actions breach CFCU’s agreements with its account holders.

Two Nationwide Classes have been defined for this action:

  • The first class is all accountholders who, during the applicable statute of limitations, were charged OD fees on APPSN transactions on a CFCU checking account.
  • The second class is all accountholders who, during the applicable statutes of limitations, were charged an OD protection transfer fee for a transfer that did not prevent an overdraft.

The first problem—that CFCU charges OD fees when accounts are not actually overdrawn—stems from a practice called “Authorize Positive Purportedly Settle Negative (APPSN).”

Here’s how this works. When a debit transaction is authorized, the financial institution puts aside the amount of the transaction, so that the funds for it will be available when the transaction settles. Until that time, that amount will not show up in the account’s available balance, and it will not be available to the customer for any other use. Theoretically, then, the debit transaction cannot overdraw the account, because the funds were put aside when the transaction was made.

However, other transactions may occur before the debit transaction settles. These intervening transactions may overdraw the account, leaving a negative balance. The financial institution then considers the debit transaction as an additional overdraft.

The complaint alleges that the Consumer Financial Protection Bureau considers this practice to be “unfair” or “deceptive.” The complaint contends that this practice is not authorized by the account agreement and alleges, “There is no justification for these practices, other than to maximize CFCU’s OD Fee revenue.”

The second problem occurs when CFCU transfers in funds from another account, purportedly to prevent an overdraft. CFCU charges a transfer fee of $10 for this service. But the complaint alleges that “CFCU automatically performs these overdraft protection transfers, and charges a $10 fee for doing so, even where the transfer will be wholly futile—i.e., where the transfer will not actually allow the accountholder to avoid an OD fee on his checking account.”

As an example, it cites an automatic overdraft protection transfer CFCU made on December 23, 2019, moving money from the savings account to the checking account of the plaintiff in this case. CFCU charged her $10 to make this transfer, but it was not sufficient to cover the transaction. Therefore, she was charged both the $10 transfer fee and the $38 OD fee.

The complaint alleges that “it was bad faith and totally outside Plaintiff’s reasonable expectations for CFCU to use its discretion to transfer funds from another account … when that transfer had no preventative purpose.”

Article Type: Lawsuit
Topic: Consumer

Most Recent Case Event

CFCU Overdraft and Overdraft Transfer Fees Complaint

October 7, 2021

This class action protests two things: First, the complaint claims that CFCU Community Credit Union assesses overdraft (OD) fees on accounts that are not actually overdrawn. Second, it claims that it assesses overdraft transfer (ODT) fees on transfers made to avoid overdrafts, even when they do not actually avoid the overdraft, so that accountholders end up paying both fees on a single transaction. The complaint alleges that these actions breach CFCU’s agreements with its account holders.

CFCU Overdraft and Overdraft Transfer Fees Complaint

Case Event History

CFCU Overdraft and Overdraft Transfer Fees Complaint

October 7, 2021

This class action protests two things: First, the complaint claims that CFCU Community Credit Union assesses overdraft (OD) fees on accounts that are not actually overdrawn. Second, it claims that it assesses overdraft transfer (ODT) fees on transfers made to avoid overdrafts, even when they do not actually avoid the overdraft, so that accountholders end up paying both fees on a single transaction. The complaint alleges that these actions breach CFCU’s agreements with its account holders.

CFCU Overdraft and Overdraft Transfer Fees Complaint
Tags: Overdraft Fees, Unfair Charges, Your Bank