Rhode Island Credit Union Overdraft Fees on APSN Transactions Class Action

The complaint for this class action alleges that Rhode Island Credit Union (RICU) improperly charges overdraft fees on certain debit transactions that were authorized with sufficient funds. “Besides being deceptive,” the complaint alleges, “this practice breaches [RICU’s] standardized adhesion contract” as well as its “duty of good faith and fair dealing[.]”

Two classes have been defined for this action:

• The APSN Class is all RICU checking account holders who, during the applicable statute of limitations, were assessed an overdraft fee on a debit card transaction that was authorized on sufficient funds and settled on negative funds in the same amount for which the debit card transaction was authorized.
• The Regulation E Class is all US residents who have or had accounts with RICU who were opted into the overdraft program for ATM and non-recurring debit card transactions through the use of an opt-in agreement which provided inaccurate or misleading information on RICU’s overdraft program in violation of Regulation E, and who were assessed overdraft charges resulting from ATM and/or non-recurring debit card transactions since August 15, 2010.

The complaint alleges that RICU improperly charges OD fees on transactions that were authorized when the accounts had enough money to pay them, through what are called Authorize Positive, Settle Negative (APSN) transactions.

How does this happen? When a customer goes to make a debit transaction, the bank compares the amount of the transaction with the amount of money in the customer’s account. If there is enough, it authorizes the transaction, then sets aside the amount of that transaction so that it no longer is reflected in the account’s balance.

These funds are no longer available to the customer and cannot be used for any other purpose. The complaint alleges, “As a result, customers’ accounts will always have sufficient funds available to cover these transactions because [RICU] has already held the funds for payment.”

However, if another transaction then overdraws the account, the complaint alleges, the customer may still be charged an OD fee when the first debit transaction settles. This happens because of what the complaint calls “a secret batch posting process.” RICU’s “actual practice is to assay the same debit card transaction twice to determine if it overdraws an account—both at the time of … authorization and later at the time of settlement.”

The complaint suggests that “at the moment a debit transaction is getting ready to settle, [RICU] 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.” This added step turns it into an APSN transaction and allows RICU to charge an OD fee.

While some banks outline this practice in their account agreements, the complaint alleges that “there is a huge gap between” RICU’s actual practices and the practices described in its account agreements. The complaint alleges that RICU has therefore violated Regulation E of the Electronic Fund Transfer Act, which governs agreements about overdraft policies.

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