Frontwave Credit Union OD Fees on APPSN Transactions Class Action

Frontwave Credit Union, the complaint for this class action alleges, unfairly charges overdraft (OD) fees on something called APPSN transactions, that is, “Authorize Positive, Purportedly Settle Negative” transactions. These are transactions that are authorized when an account balance is positive, but settle at time when the account is in overdraft, and the complaint alleges that these charges are not permitted by Frontwave’s account agreements.

The class for this action is all Frontwave Credit Union checking account holders who, during the applicable statute of limitations, were charged OD fees on APPSN transactions on their Frontwave checking accounts.

The complaint alleges that Frontwave’s account documents promise only to charge OD fees where accounts do not have sufficient funds to cover transactions. Still, the complaint alleges, Frontwave charges OD fees when funds are actually available to cover transactions.

APPSN stands for “Approve Positive, Purportedly Settle Negative.” Why does the complaint argue that Frontwave always has the funds to pay APPSN transactions? The complaint explains it this way: When customers go to make a debit transaction, Frontwave checks the account balance to make sure that funds are available in the account to cover it. If so, Frontwave approves the transaction, then puts aside the money to pay it.

This is the “Approve Positive” part of an APPSN transaction. These funds will no longer be reflected in the account’s available balance, and the account holder cannot use them for anything else.

But what happens if, before that debit transaction settles, the account holder overdraws the account? The complaint alleges that funds are always available to pay the original debit transaction, but it claims that Frontwave “uses a secret posting process” when it settles those transactions, “do[ing] something new and unexpected, during the middle of the night as part of its nightly batch posting process. Specifically, [Frontwave] releases the hold placed on funds for the transaction for a split second, putting the money back into the account, then re-debits the same transaction a second time.”

The complaint alleges that this additional step is the “Purportedly Setttle Negative” part of the APPSN transaction and allows Frontwave to charge the account holder an OD fee when it is not warranted.

The complaint alleges that the Consumer Financial Protection Bureau (CFPB) calls this practice “unfair” and “deceptive.” It quotes the CFPB as saying, “Consumers likely had no reason to anticipate this practice, which was not appropriately disclosed. They therefore could not reasonably avoid incurring the overdraft fees charged.”

According to the complaint, this APPSN process violates the terms of its account documents.

Article Type: Lawsuit
Topic: Contract
Tags: APPSN Transactions, Overdraft Fees, Your Bank