Litigation risk: Account fees

In the past few years, credit unions have faced increasing litigation risk from plaintiffs’ attorneys filing class action lawsuits, particularly in the area of various fees that may be assessed to both members and nonmembers. Some risks are ongoing such as overdraft and insufficient funds fees lawsuits.  NAFCU is aware of some recent class action litigation trends that are worth keeping an eye on. Overall, these lawsuits seem to fit in more with a general trend, where claims focus on account agreements. This includes whether the contractual language was clear enough for consumers to understand how and when fees would be imposed, and if the agreement created a contractual right to assess the fees.

First, there are banks and credit unions that have been targeted by plaintiffs’ attorneys regarding foreign transaction fees. Regulation Z requires disclosure of these fees on the credit card side. For debit cards, Regulation E has a broad requirement to disclose any fee imposed to make an electronic fund transfer (EFT). These suits claim that consumers are incurring a foreign transaction fee on either credit card or debit card transaction for purchases made while physically in the United States, but to a merchant located overseas. These kinds of lawsuits claim that account agreements do not clearly allow for these fees to be assessed when the member conducts the transaction from within the United States.

For example, Citibank was hit with a lawsuit on this topic in 2019. The bank’s agreement said “[w]henever you use your Citibank® Banking Card outside of the U.S. and Puerto Rico to get cash at an ATM or to purchase goods or services…” (Emphasis added.) The argument is that most consumers would probably not think that buying things online from overseas vendors would lead to such fees. Some account agreements are clearer that these kinds of fees do not require being physically overseas to be assessed. Some credit unions choose not to assess these kinds of fees. Recently, NAFCU members discussed this issue on our Compliance, Risk & BSA Network, join the conversation here.


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