NJ CU Hit With Overdraft Lawsuit

(From CU Today) – Another credit union is facing a lawsuit that alleges unfair overdraft practices.

This time it’s the $391-million Credit Union of New Jersey that’s being accused of “deceptive” and “unfair” practices based on the language in its overdraft contract, according to the complaint.

As CUToday.info has extensively reported, overdraft class-action lawsuits have been growing in recent years as a handful of legal firms search for plaintiffs across the country.

The class-action suit, filed against CU of New Jersey in the U.S. District Court for the District of New Jersey, alleges the CUNJ has regularly charged plaintiff Laronda Hickmond and other checking account holders overdraft fees on transactions that didn’t result in a negative balance.

The complaint alleges the credit union has violated the promise it made to account holders that overdraft fees would only be enforced when an account does not have enough funds to cover a transaction.

“Besides being deceptive, unfair, and unconscionable, these practices breach contractual promises that CUNJ made to all accountholders—namely, that it would charge overdraft fees only as a result of transactions that actually overdraw an account,” the complaint stated.

Plain Language

The complaint further alleges the CU’s checking account contract, “in plain, clear, and simple language,” promises “CUNJ will only charge an overdraft fee on a transaction where ‘the available funds in your share or deposit account are not sufficient to pay the full amount of a check, draft, transaction, or other item, plus any applicable fee.’

“Nonetheless, as happened to plaintiff here, CUNJ regularly charges overdraft fees to its consumer deposit accounts even where they are not overdrawn. Specifically, plaintiff was repeatedly charged overdraft fees on routine transactions, even though, according to the monthly account statements prepared by CUNJ, her account balance never went into the negative for the supposed overdraft event. By definition, then, there were always funds to pay the full amount of those transactions—yet CUNJ assessed an overdraft fee on them anyway. In short, CUNJ is not authorized by contract to charge overdraft fees on transactions that have not overdrawn an account. But CUNJ nonetheless has done so and continues to do so, in breach of its contract with its account holders,” the complaint states.

Similar Case

Brandon Wilson, a partner at Honigman, LLP, which has successfully defended credit unions across the country in overdraft suits, told CUToday.info the case is similar to many of the others being filed across the country.

“The plaintiff is alleging that the credit union is improperly charging overdraft fees on so-called authorize positive, settle negative (APSN) transactions,” Wilson explained.

In a previous CUToday.info report, that shared how Wilson and Honigman successfully defended Oak Ridge, Tennessee-based Y-12 CU in an overdraft suit, the attorney shared advice for credit unions about checking account/overdraft contract language.

“Regular maintenance of your account agreement documents is a must.  The plaintiff’s bar is constantly contriving new claims relating to fees. Therefore, including specific language to further explain how and when fees are charged is critical,” Wilson said. “Credit unions should also seriously consider including arbitration provisions in their account documents as a way to streamline resolution of disputes with members. Arbitration is often less expensive and leads to faster resolution than going to court, which is a win-win for the credit union and its members.”

CUToday.info reached out to CUNJ for comment, however the credit union did not respond by press time.