USAA Savings Bank Overcharged Military Servicemembers on Interest and Fees, Class Action Alleges [UPDATE]

New to ClassAction.org? Read our Newswire Disclaimer

A proposed class action alleges USAA Federal Savings Bank has unlawfully overcharged American servicemembers on interest and fees, and consequently inflated their principal balances on which compound interest was charged. 

The 37-page lawsuit alleges that in addition to overcharging U.S. servicemembers, USAA also concealed the overcharges within its military benefit program until 2021, when the institution sent “misleading correspondence” and payment checks to some military families. The complaint says that when the plaintiffs investigated USAA’s compliance with the federal Servicemembers Civil Relief Act, the individuals learned USAA had committed “wholesale violations” of the debt relief and financial protection law, damaging thousands of military families. 

The Servicemembers Civil Relief Act (SCRA) is a law that guarantees that all debts incurred by an American servicemember before being called to active duty are reduced to a six-percent interest rate, from the date deployment orders are received through the ensuing active-duty period. Moreover, the law also requires financial institutions to forgive interest above six percent, the case adds. 

As the lawsuit tells it, USAA, as a means to attract and retain military customers, provides contractual benefits that are more generous than those required by the SCRA. For example, USAA has promised to reduce servicemembers’ interest rates on pre-active duty balances to four percent, and apply a four-percent interest rate to all balances and waive fees during active duty and for a period after active duty, or for a period after deployment or permanent change of station, the filing says. 

The case stresses that servicemembers relied on USAA’s representations with regard to its military benefits program in deciding whether to maintain and incur more debts on their accounts with the bank.

“If Defendants had failed to provide this competitive program, Plaintiffs and other class members would have closed their accounts with Defendants and moved to another bank,” the suit says, alleging specifically that USAA failed to reduce interest rates on servicemembers’ accounts as promised and required, waive fees as promised and properly calculate the SCRA and its own military benefits program’s debt forgiveness requirements.

The alleged failures on the part of USAA Savings Bank occurred by way of complex computer calculations not discoverable by servicemembers given the customers’ periodic account statements and other communications “incorrectly reflected” that their interest rates were properly reduced, the case claims. 

Although USAA allegedly conducted an internal audit of its SCRA compliance and determined it had “systematically and repeatedly” violated the law and the stated terms of its military benefits program, the audit did not cover the entire period during which USAA overcharged military customers, the case claims. After discovering the apparent SCRA violations, USAA, the suit says, “never admitted any specific violations to Plaintiffs or other class members or provided any accounting of the overcharges,” opting instead to issue checks with little explanation to certain servicemembers. 

“Instead, Defendants sent unsolicited ‘remediation’ checks to some servicemembers, including Plaintiff and other class members, with accompanying correspondence that misleadingly stated that the recipient ‘may have’ been entitled to ‘benefits and/or protections,’” the complaint reads. “The correspondence was often sent in a nondescript envelope that appeared to many servicemembers as a solicitation or ‘junk mail.’” 

Servicemembers who contacted USAA to inquire about the payment checks were answered with “scripted answers that contained misleading and false information,” in an attempt by the defendants to “conceal the nature and/or extent of their misconduct,” the lawsuit alleges. 

The lawsuit looks to represent all persons who, at any time on or after September 11, 2001, received reduced interest and/or fees from USAA Federal Savings Bank and USAA Savings Bank on an interest-bearing obligation because of an obligor’s military service, but excluding persons who have executed a release of the rights claimed in the lawsuit.

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