Municipal Credit Union Hit with Class Action Over Alleged Assessment of Overdraft Fees

New to ClassAction.org? Read our Newswire Disclaimer

A proposed class action has been filed over Municipal Credit Union’s alleged practice of charging multiple non-sufficient funds or overdraft fees on a single transaction.

Per the case, the defendant has overstepped the terms in its customer contracts that stipulate the credit union will charge only a single $32 non-sufficient funds fee when a customer’s account contains insufficient funds to cover “an ACH debit request or bill payment you authorize or check (share draft) you draw” and the transaction is rejected. Instead, Municipal Credit Union charges a new fee each time the transaction is reprocessed, even when the customer has taken no action to re-authorize the charge, the suit alleges.

“But Municipal’s contract never states that this counterintuitive and deceptive result could be possible and, in fact, promises the opposite,” the complaint scathes.

According to the suit, the credit union’s fee practice, through which the defendant is alleged to make “millions of dollars annually,” disproportionately harms “racial and ethnic minorities, the elderly, and the young, many of whom regularly live paycheck to paycheck and therefore carry low bank account balances.”

The lawsuit alleges Municipal’s unlawful overdraft practices are rooted in the credit union’s treatment of the reprocessing of an ACH or check item that was initially rejected for insufficient funds as “a new and unique item” subject to an additional fee. Per the case, consumers would never expect that a single ACH or check transaction could incur multiple fees. Indeed, this practice is “not universal in the financial services industry” and never disclosed in the contract that governs customers’ checking accounts, the suit attests. From the complaint:

The lawsuit alleges Municipal’s overdraft fee practice amounts to a breach of the organization’s duty of good faith and fair dealing, which prohibits the credit union from “exercising its discretion to enrich itself and gouge its customers.” Per the suit, Municipal has assessed the unlawful NSF fees “without [customers’] permission and contrary to their reasonable expectations” that they will be charged only one fee per item.

The case looks to represent Municipal checking account holders who, during the applicable statute of limitations, were assessed multiple fees on an item that was reprocessed by the credit union without a new authorization from the customer.

Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s newsletter here.