GPO Federal Credit Union Overdrafts with APPSN Transactions Class Action

Financial entities that provide banking services, like the defendant in this case, GPO Federal Credit Union, often earn money on overdraft (OD) fees. But the complaint for this class action alleges that GPO charges OD fees on transactions that do not actually overdraw customer checking accounts, with Authorize Positive, Purportedly Settle Negative (APPSN) transactions.

The National APPSN Class is all GPO FCU checking account holders in the US who, during the applicable statute of limitations, were charged OD fees on transactions that were authorized into a positive available balance. A New York APPSN Subclass has also been proposed, for GPO FCU checking account holders in the above class in New York.

Here’s how a debit card transaction works, according to the complaint: When debit card holders want to make a debit card transaction, GPO, like most financial institutions, checks to make sure the customer’s account has sufficient funds for the transaction. If it does, GPO approves the transaction, then puts aside that amount. The customer’s account balance no longer reflects this amount, and the funds are no longer available to the customer to use for any other purpose.

However, transactions do not settle on the day they are made. The settlement, or the actual passing of the funds from the buyer’s bank account to the seller’s bank account, can take place a few days later. The complaint contends that such debit card transactions should never overdraw the account when they settle because, at the time they were approved, the money for the transaction was set aside and no longer available to the customer. Thus, the complaint says, GPO will always have the funds to pay these particular transactions.

So how is it that GPO may charge an OD fee on this kind of transaction? The complaint claims that this can happen if another transaction overdraws the account in between the original debit transaction and its settlement. The complaint alleges, “In reality, GPO FCU’s acutal practice is to deduct the same debit card transaction twice to determine if the transaction overdraws an account—both at the time a transaction is authorized and later at the time of settlement.”

The complaint claims, “Upon information and belief, something more is going on: at the moment a debit transaction is getting ready to settle, GPO FCU does something new and unexpected, during the middle of the night, during its nightly batch posting process. Specifically, GPO FCU releases the hold placed on funds for the transaction for a split second, putting money back into the account, then re-debits the same transaction a second time.”

The Consumer Financial Protection Bureau has called this practice “unfair” or “deceptive,” the complaint alleges, 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.”

Article Type: Lawsuit
Topic: Consumer
Tags: Breach of Contract, Breach of the Covenant of Good Faith and Fair Dealing, Overdraft Fees, Your Bank