NAFCU continues to hear from credit unions who have either received a demand letter or notice of a complaint filed relative to overdraft and insufficient funds fees (NSF). We have blogged about this issue before and addressed it in a past Compliance Monitor article (member-only), but wanted to provide some high level information that may help credit unions who are continuing to analyze the risks here.
For several years, financial institutions, including credit unions, have faced class action claims in this area. The claims often had a few elements:
- Violations of Regulation E even where a credit union utilized the rule’s model form;
- Assertions that the account agreement was violated when the account balance was calculated inappropriately and fees were assessed; and
- Multiple state law claims
More recently, the Regulation E claims are not as frequently seen in these cases. This may be in part because the Electronic Funds Transfer Act, which is implemented by Regulation E, only allows one year for bringing a claim to court. It may also be that Regulation E claims are not necessary if a Plaintiff is not trying to justify bring a case in federal court, since federal courts can only hear certain types of cases, such as those involving a federal law or those involving parties who are from different states.
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