What Ruling Could Mean For Overdrafts

Feature Birch OD Lawsuit

By Ray Birch

ROYAL OAK, Mich.—One attorney is hoping a recent court decision in an overdraft lawsuit case against a credit union will become a precedent and eventually stem the tide of OD class-action suits likely heading credit unions’ way.

Michael Bell, with Howard & Howard here, told CUToday.info that a motion to dismiss won by his firm in a class-action overdraft lawsuit case against Marietta, Ga.-based LGE Community CU is worth paying attention to.

Chief Federal District Court Judge Thomas W. Thrash, Jr. dismissed the suit against LGE, which alleged that the credit union improperly assessed overdraft fees in violation of its member account agreement and violated the Electronic Funds Transfer Act. In particular, the suit alleged that LGE breached its standard member account agreement by charging overdraft fees when the member’s so-called account “ledger balance” was positive although her available balance was negative and failed to use a proper overdraft disclosure form as required under the Electronic Funds Transfer Act, Bell explained.
The plaintiff in the suit was Carol Tims.

“This is a significant decision. Judge Thrash is a highly respected judge,” said Bell. “This opinion he wrote really struck down the plaintiff’s arguments.”

In his opinion, Thrash wrote, “None of these cases persuade the Court that the Plaintiff’s interpretation is anything more than her own idiosyncratic reading of the agreements. Although the Plaintiff’s interpretation may be persuasive or reasonable when certain clauses are viewed in isolation, they lead to conflict and absurdity when viewing the agreements as a whole. The only reasonable interpretation of the agreements requires the use of the available balance method. Consequently, the Plaintiff’s breach of contract claim must be dismissed.”

“This was a well-reasoned decision by Judge Thrash. It was a complete victory for our client and we hope other courts take notice of this decision and follow Judge Thrash’s lead,” said Bell.

Bearing On Other Cases?

Bell hopes the decision may have some bearing on a number of other overdraft cases across the country. He estimated that there may be between 20-30 lawsuits currently in the courts filed against banks and credit unions. In addition to the LGE case, Howard & Howard is currently defending United FCU in St. Joseph, Mich., and Advia CU in Kalamazoo, Mich.


Michael Bell

Bell fears more credit unions are going to find themselves defendants in overdraft lawsuits, saying lawyers across the nation are “trolling” for overdraft lawsuit plaintiffs.

As CUToday.info reported here, newspaper ads in Detroit have been run by the Birmingham, Mich.-based asbestos law firm, Michael B. Serling, P.C., seeking people who claim to have been the victims of "multiple overdraft charges.” The Serling firm has been running similar ads seeking victims of mesothelioma and lung cancer allegedly caused by asbestos exposure. 

“Has your credit union assessed multiple overdraft charges when you believed you had a sufficient balance?” the ads ask. “Certain credit unions determine your ‘available balance’ in a manner that understates the actual balance.”

Bell hopes that the LGE decision will dissuade plaintiff’s lawyers from filing similar lawsuits. Bell said that while most credit unions each have some small differences in their overdraft disclosure policies, they are all very similar and follow CFPB overdraft guidelines. 

The plaintiffs in the ongoing cases, however, allege that CUs do not adequately describe how their overdraft programs work, leading to higher overdraft charges.

A key point being made by Howard & Howard in the ongoing cases is that credit unions are following CFPB regulations designed to enhance member understanding of overdraft fees.

“Credit unions by and large go the extra-mile to communicate with their members and to follow CFPB’s guidance. We believe CFPB agrees with our position on these issues,” said Bell.

Cordray Served Subpoena

As CUToday.info reported, Howard & Howard has served a subpoena on the CFPB demanding the deposition of now former Director Richard Cordray concerning Cordray’s public statements regarding issues such as model forms issued by CFPB for credit unions to use with their members. Bell contends the director’s testimony will bolster the cases of credit unions he is defending.

Bell said that the CFPB has yet to comply and that his firm is not giving up on having the CFPB formally weigh in on these cases. Bell acknowledged that Cordray’s departure from the agency combined with Bureau policy means if the Bureau does comply that the testimony will likely come from someone other than Cordray.

“But we think that the CFPB’s testimony in these cases is very critical,” said Bell. “We will continue to work to get that.”

Bell noted that the LGE decision is the second such overdraft case to be dismissed by a court at the initial pleading stage. He hopes that these decisions, will sway court decisions and begin to tip other class-action suits in favor of defendants.

“Will this decision against LGE slow down lawyers from trolling for overdraft case plaintiffs? Not yet,” said Bell. “I wish it would. But we need more well-reasoned decision like we saw in LGE.”

Section: Standard
Word Count: 1060
Copyright Holder: CUToday.info
Copyright Year: 2019
Is Based On:
URL: http://www.cutoday.info/THE-feature/What-Ruling-Could-Mean-For-Overdrafts