SchoolsFirst, Star One, Kern Schools Face Overdraft Fraud Class Action Lawsuits
A San Jose, Calif., attorney has slapped the $9.4 billion SchoolsFirst Federal Credit Union, $6 billion Star One Credit Union and $1.3 billion Kern Schools Federal Credit Union with class action lawsuits that allege overdraft shenanigans.
The court documents, filed June 21 in Northern California U.S. District Court, contain the same language used in lawsuits against big banks like Bank of America, Wells Fargo and others.
Attorney Fernando Chavez and his plaintiffs accuse the big California credit unions of deceptive business practices that involve “the systematic manipulation and re-ordering of electronic debit transactions from the highest dollar amount to the lowest dollar amount … to maximize the amount of overdraft fees collected.”
The suit not only alleges re-ordering, but also charges the credit unions published inaccurate and unreliable account balance information online, by phone and by ATM; delayed posting transactions; charged exorbitant overdraft fees; failed to disclose overdraft practices; and, engaged in deceptive advertising campaigns regarding checking accounts.
Specific legal complaints include fraud, negligent misrepresentation, unjust enrichment, breach of fiduciary duty, and violation of the Unfair Business Practices Act and Professions Code, among others.
Rick Heldebrant, president/CEO of Star One, told Credit Union Times his institution does not reorder transactions, nor does it order them largest transaction to smallest during processing.
Heldebrant said Star One defendants have not been served any legal papers, but he looked the court documents up online after hearing about it from the media. He said the allegations in the suit are false.
The 11 defendants in the Star One suit are all current members of the Board of Directors, according to Star One’s website. Judge Howard Lloyd has been assigned to the case.
Like Heldebrant, Kern Schools President/CEO Steve Renock says he has not been served any papers, nor has he seen the complaint. However, Renock said he “believes the allegations are not correct at this time.”
Renock would not say if Kern Schools reorders transactions to maximize overdraft income, or in which order transactions are processed. He said he was advised by credit union attorneys to not speak on the matter until the lawsuit has been reviewed, but said “we treat all members fairly and believe all fees are appropriate.”
Kern School’s 11 defendants are all listed on the credit union’s website as current board members. Judge Grewal was also assigned to the Kern Schools case.
According to an on-hold recording, SchoolsFirst was experiencing high volumes of calls, and as a result, it was not possible to reach anyone for comment at press time.
Defendants in the SchoolsFirst case include board members John Didion, Lynn Hartline and Linda Salata, as well as President/CEO Rudy Hanley. Judge Paul Singh Grewal has been assigned to the suit.
If the parties fail to reach an early settlement, case management conferences on the cases are scheduled for late August and early September, 2012.
The lawsuit comes as the Consumer Financial Protection Bureau is researching overdraft practices, and collecting information from financial service providers and the public.
In 2011, class action lawsuit Closson v. Bank of America resulted in a $410 million settlement. According to the settlement website, Bank of America was forced to pay up to $78 to customers who could prove they had an account at BofA, had account accessibility through a debit card, check card or another other card used for debit purchases, and paid at least one insufficient funds fee, overdraft fee, returned item fee, overlimit fee or similar fee related to a debit card transaction between 2000 and 2007.