California Credit Union League President/CEO Diana Dykstra said attorneys in her state are “fishing for members” to take part in class action lawsuits that accuse credit unions of improper overdraft practices.
After speaking with the CEOs at the six credit unions currently being sued, she said the suits are not only frivolous and malicious, they lack duty of care.
“One of the plaintiffs hasn’t even had an overdraft,” Dykstra said of one credit union, which she declined to name.
A few months ago, Dykstra said she received a call from a member credit union in Northern California who said a radio ad was running that urged listeners who had been harmed by credit union overdraft practices to call a law firm.
Website classaction.org is also fishing for plaintiffs, listing “Unfair Overdraft Protection Fees” on the site under the Consumer Fraud Class Action heading.
“Many of the country’s largest banks, including Bank of America, Citibank and Wachovia are allegedly subjecting their customers to unfair and deceptive overdraft protection charges,” the website says. “We are investigating to determine whether smaller, regional banks are also engaging in similar practices.”
Dykstra said attorneys bringing the suits against credit unions are purposely listing volunteers as defendants to scare them into settling without getting as far as the discovery phase.
Dykstra said the California league emailed member credit unions shortly after she learned about the first suit against the $751 million Xceed Financial Credit Union was served for a similar suit in April.
In that email, Dykstra said she encouraged CEOs to review overdraft policies and procedures, because at the CEO level, many may not know exactly how overdrafts are being sorted, charged or paid.
“Make sure you know what you’re doing, and that it’s in the best interest of members,” she said.
Back when overdraft protections were first introduced, Dykstra said the prevailing opinion at the time was that it was more member-friendly to process items from large amounts to small, with the idea that larger items would be more important.
A recent poll conducted by NAFCU and published in the trade association’s June issue of the Economic & CU Issues Monitor, found that 83.3% of respondents process transactions chronologically. Another 9.5% process transactions according to value with the largest items first, and 7.1% process transactions by value with the smallest items first.
Dykstra said California credit unions targeted by the suits tell her they don’t intend to settle.
“No one is willing to pay to make it go away, it’s a matter of principle,” she said. “They didn’t do anything wrong and they are going to fight it.”