A federal judge in West Virginia granted class certification on Monday for a lawsuit brought by Joseph Boczek, who claims that the $29.3 billion Pentagon Federal Credit Union unlawfully charged him a $5 “pay-to-pay" fee when he and other members made loan payments by phone or online.
The McLean, Va.-based PenFed denied Boczek’s allegations and opposed the lawsuit’s class certification.
The lawsuit, filed in May 2023, claims the $5 fee was not authorized by law or contract when PenFed members made payments electronically. Under West Virginia’s Consumer Credit and Protection Act (WVCCPA), financial institutions are prohibited from collecting pay-to-pay fees to cover service costs or create an additional source of profit, according to the civil complaint.
“The actual cost of Defendant (PenFed) to process telephone and online payment transactions is very low --- around fifty cents --- well below the pay-to-pay fees that Defendant charges West Virginia borrowers,” the lawsuit states. “Defendant impermissibly recoups its collection cost from borrowers and pockets the excess as pure profit.”
In its legal filings, PenFed countered that the convenience fees were contractually authorized and not barred by the West Virginia law. The credit union also contended that as a not-for-profit, member-owned financial institution, it cannot profit from such fees.
PenFed acknowledged that Boczek paid the $5 fee through employee-assisted payments but argued he voluntarily chose this payment option and was later refunded the fees.
Records show PenFed charged at least 1,497 fees across 422 consumer loans from its West Virginia members.
After U.S. District Court Judge Thomas S. Kleeh in Clarksburg denied PenFed’s motion to dismiss the case in March 2023, Boczek filed an amended class-action complaint. PenFed opposed the class action lawsuit arguing Boczek failed to meet the legal standards for certification. Judge Kleeh’s 22-page order states otherwise.
Contact Peter Strozniak at peter.strozniak@arc-network.com
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