$16M SETTLEMENT FOR OVERDRAFT FEES

On October 5, 2020, the Navy Federal Credit Union agreed to settle a class action suit for $16 million that will reimburse an estimated 700,000 current and former members who were charged two or three non-sufficient funds (NSF) fees on a single transaction by Navy Federal Credit Union between Jan. 28, 2014, and Oct. 27, 2020. An U.S. District Court judge in Virginia has issued a preliminary approval for the settlement in Lambert v. Navy Federal Credit Union, with final approval expected in 2021.

The suit was brought by Ruby Lambert in January 2019 after she was charged a second $29 NSF fee when a $96 check on her account was presented a second time after it was bounced to her insurance company. Although Lambert acknowledged that Navy Federal was allowed to charge her a single NSF fee, she argued in court documents that the credit union breached terms of member account agreements when it charged her a second NSF fee for the same insurance check payment.

Lambert’s suit was dismissed in August 2019 because Navy Federal’s account agreement gave the CU a contractual right to charge an NSF fee each time an NSF check is presented. Lambert appealed to the U.S. District Court for the Eastern District of Virginia. Navy Federal and Lambert’s lawyers agreed to settle the suit.

The $16 million cash fund will pay for $5.2 million in attorney fees, a $5,000 “service award” for Lambert, and millions in NSF fee reimbursements for an estimated 700,000 current and former Navy Federal members who were assessed a second or third NSF fee for a single payment transaction that was rejected because of insufficient funds in their accounts from January 28, 2014, to October 27, 2020. Navy Federal will separately pay all settlement administration costs.

Note:  Discussions regarding overdraft fee issues have been limited during the past few years. The author expects the topic to return to prominence with the new administration. This issue and others will be discussed in Compliance Resource’s upcoming webinar entitled Compliance Expectations in the New Administration. Watch this blog for further details regarding the program.

 

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