We tend to assume that when we swipe our debit cards, funds are withdrawn from our accounts immediately. But the actual situation can be a little more complicated than that. This class action alleges that Navy Federal Credit Union (NFCU) did not properly disclose its methods of setting aside funds from customer accounts and paying transactions, leading to extra “Optional Overdraft Protection Fees” (OOPFs) being charged to customers for overdrafts they did not expect.
Two classes have been proposed for this class action. The national class is made up of all NFCU checking account holders who, during the class period, were charged OOPFs on transactions that were authorized on a positive available balance. The California subclass is made up of all NFCU checking account holders who, during the class period, were charged OOPFs on transactions that were authorized on a positive available balance. The class period runs from June 22, 2011 to the date of class certification.
When you use your debit card, let’s say to buy $100 worth of groceries at the supermarket, your account is normally debited immediately for the $100. However, the funds are not transferred immediately to the supermarket. Instead, the funds are usually set aside and not available to any other use, and the actual payment happens when the transaction settles, which may be as long as a few days later.
If you don’t have the money in your account to cover a transaction, institutions like NFCU can decide to either pay or reject the transaction. If they decide to pay it, they will charge you an overdraft fee for that service. So what is the issue in this class action? Here’s an example.
According to the complaint, on or prior to October 26, 2014, Plaintiff Jenna Lloyd initiated five smaller debit transactions on her NFCU account, which she had funds to cover, so that she did not believe any of them would incur overdraft fees. The following day, after the other transactions, the complaint claims, Lloyd made a withdrawal from an ATM machine. Because she did not have funds to cover the withdrawal, Lloyd agrees that this transaction should have incurred an overdraft fee. Instead, the complaint alleges, she incurred three overdraft fees as the earlier transactions settled. Thus, the complaint says, instead of being charged $20 for a single overdraft, she ended up being charged $60 for three overdrafts.
The complaint alleges that consumers believe that debits are made in a specified order—the order in which transactions are initiated. Because NFCU’s account documentation did not make clear that its procedures followed a different course, the complaint contends, it engaged in breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment.