Digital Federal Credit Union in Marlborough, Mass., has agreed to pay $1.8 million to settle claims regarding its overdraft practices.
The $9 billion-asset institution will also forgive roughly $766,000 in overdraft charges that haven’t been collected yet, according to court documents. It also agreed to use ledger balances to calculate overdraft fees for at least the next three years.
The class action lawsuit claimed that Digital charged members overdraft fees even when they had enough money in the ledger balances of their checking accounts, but not their available balances, to cover a payment. The case also claimed that that the credit union did not have members properly opt in to its overdraft program for ATM and debit cards.
A hearing to approve the settlement is scheduled for December. Representatives from the credit union did not immediately respond to a request for comment.
The lawsuit was filed against Digital in the U.S. District Court for the District of Massachusetts in June 2018 and alleged a number of claims, including breach of the credit union’s overdraft opt-in contract and breach of the implied covenant of good faith. The CU initially requested the suit be dismissed but, as reported,
The class action settlement includes members who were charged an overdraft fee between June 15, 2012 and June 15, 2019, when they had sufficient funds in their ledger balance, but not available balance. The suit also covers members who were charged an overdraft for an ATM or debit card transaction from June 15, 2017, to Sept. 1, 2018.
A number of credit unions have faced complaints and lawsuits about their overdraft policies in recent years.
