Pentagon Federal Credit Union headquarters. Credit/Adobe Stock
A federal appeals court denied a petition from the $29.3 billion Pentagon Federal Credit Union to hear arguments over whether to overturn a lower court’s decision that granted class-action status for a member’s lawsuit alleging the credit union charged unlawful fees on consumer loan payments.
The lawsuit was originally filed in May 2023 by PenFed member Joseph Boczek of West Virginia, who claimed the credit union charged a $5 “pay-to-pay" fee for consumer loan payments made by phone or online. Under West Virginia’s Consumer Credit and Protection Act (WVCCPA), financial institutions are prohibited from collecting such fees to cover service costs or generate profit, according to the civil complaint. The law only applies to consumer loans, not business loans.
In his lawsuit, Boczek argued that PenFed charged the $5 convenience fee to other West Virginian PenFed members 1,497 times on 422 accounts. That could amount to $7,485 in aggregated damages, which could theoretically seek $2,050,919 in damages, plus legal fees, according to PenFed’s estimate.
U.S. District Court Judge Thomas S. Kleeh in Clarksburg granted the Boczek’s lawsuit class certification on Nov. 3. About two weeks later, PenFed petitioned the U.S. Court of Appeals for the Fourth Circuit in Richmond, Va., to hear arguments on whether to vacate that certification.
The appeals court three-judge panel unanimously denied the credit union’s petition on Dec. 5, which means the class action lawsuit can move forward.
Attorneys for PenFed and Boczek did not respond to a CU Times request for comment.
The issue of whether the WVCCPA applies to a loan is determined on how the debtor used the funds, rather than more readily identifiable facts such as the debtor’s status as an individual or a corporate entity, PenFed argued in its appeals filing.
“Since class members are impossible to identify without extensive and individualized fact-finding or minitrials, Boczek failed to satisfy the ascertainability and predominance requirements for class certification,” the credit union stated.
However, Judge Kleeh wrote in his ruling on the ascertainability requirement that an individualized inquiry into the primary purpose for each loan is not necessary because the class is limited to consumer loans. He also wrote it is not necessary to individually determine if the loans were used for personal, family or household purposes because PenFed’s own records established that there were collected on consumer loans.
Peter Strozniak can be reached at peter.strozniak@arc-network.com.
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