USAA has agreed to pay $64.2 million to settle a class action lawsuit that alleged it overcharged thousands of military members who were subject to interest rate protections.
The proposed settlement, outlined in a federal court filing last week, would resolve allegations that USAA violated the Servicemembers Civil Relief Act and other laws protecting those in the military.
The San Antonio-based bank, which caters to military members and veterans, has denied wrongdoing under the agreement. Some 210,000 people could qualify for the payments if the federal judge in North Carolina approves the settlement.
In a filing, lawyers for those suing USAA said the deal is "worthy of the court's approval" and looks similar to separate cases where Bank of America and JPMorgan Chase settled for $42 million and $62 million, respectively.
While federal regulators had forced USAA to send checks to affected customers, the filing said that the "remediation payments failed to fully compensate" them for their monetary damages.
In a statement, USAA said it had already compensated for "errors that may have occurred" and that roughly half of the settlement "is simply reissuing checks we had previously mailed that our members never cashed."
"USAA strongly disagrees with the lawsuit allegations, but this settlement is in the best interest of our membership and allows USAA to avoid lengthy and expensive litigation so we can focus on providing exceptional service," the bank said.
It also said it goes "beyond minimum requirements" by offering lower interest rates than the law requires.
In 2020, regulators
The lawsuit, filed in 2021, argued that USAA continually failed to reduce the interest rates service members paid on loans to 6% — a low rate they're eligible for when they're preparing for active duty. Lenders can't charge higher interest rates on that loan after military customers leave active duty.
For years, USAA was "charging interest rates and fees that were too high, allowing unlawful charges to improperly inflate servicemembers' principal balances and charging compound interest on these inflated balances," the lawsuit said.
Carmin Nowlin, a Georgia resident who was part of the lawsuit, alleged the interest rate on her credit card went up from 4% to 11.9% after she left active duty. Nowlin had done three deployments in Iraq, including one in 2018 and 2019.
The lawsuit said USAA sent her several checks "indicating that they may have overcharged her," including a refund for nonsufficient funds and overdraft fees between 2010 and 2020. But she "never received an accounting of the overcharged interest or improper fees," the lawsuit said.
Florida resident Dean Brink, who was also part of the lawsuit and was deployed to Saudi Arabia and Afghanistan, had also received checks for the overcharging issue. But the lawsuit said USAA still had the money he was entitled to receive because he "could not cash" the check, which had been issued to him and his ex-wife together.
The agreement was filed with the U.S. District Court for the Eastern District of North Carolina.
