Wescom Central Credit Union Disclosures for Overdraft Program California Class Action

Federal Reserve Regulation E (Reg E) aims to ensure that banking customers are not enrolled in overdraft programs without their knowledge and that they are fully aware of their consent to enter one. But the complaint for this class action alleges that Wescom Central Credit Union violates Reg E requirements and also California’s Unfair Competition Law.

Regulation E requires that financial institutions must do certain things before they are allowed to charge customers overdraft fees on one-time debit card and ATM transactions. One such requirement is that they give customers a complete, accurate disclosure of their overdraft services that is clear and easily understandable.

Wescom does offer customers an opt-in disclosure agreement for its overdraft services, entitled, “What You Need to Know About Overdrafts and Overdraft Fees.” However, the complaint alleges, Wescom’s disclosure agreement “provides customers with ambiguous, misleading, and/or inaccurate language” to describe when Wescom will charge an overdraft fee.

“Specifically,” the complaint says, “the opt-in disclosure agreement does not disclose that Wescom uses an internal artificial account balance to determine if a debit card or ATM transaction will be considered overdrawn (i.e., ‘available balance’), instead of the official and actual balance of the account.”

Because Reg E requires accurate disclosures before charging overdraft fees on certain kinds of transactions, the complaint alleges, Wescom’s “assessment of all overdraft fees against members for one-time debit card and ATM transactions has been and continues to be illegal.”

According to the complaint, Wescom figures the account balance for overdraft purposes “using an artificially reduced calculation … called the ‘available balance,’ which deducts money it unilaterally decides should be held for future transactions. When these future holds are accounted for, the calculation often results in a negative ‘available balance’ existing only on paper…”

The complaint states, “While this practice is unfair on its face, the disclosure of the practice is at issue, not the practice itself.” That is, the complaint claims that the disclosure agreement does not clearly and understandably describe which version of the balance is used to determine whether an overdraft fee will be charged.

The result, the complaint claims, is that Wescom “assessed overdraft fees on 10-20% more Regulation E overdraft transactions than would otherwise be the case if it used the actual balance to determine if an account was overdrawn.”

Two classes have been defined for this action:

• The Regulation E Class is all California Wescom members who have or have had accounts with Wescom who were charged an overdraft fee on a one-time debit card or ATM transaction, between August 15, 2010 and the date the class in this case is certified.
• The UCL, Section 17200 Class is all California Wescom members who have or have ahd accounts with Wescom who were charged an overdraft fee on a one-time debit card or ATM transaction between September 23, 2017 and the date the class in this case is certified.

Article Type: Lawsuit
Topic: Consumer
Tags: Did Not Make/Receive Proper Disclosures, Overdraft Fees, Regulation E, Your Bank