San Antonio’s Credit Human Federal Credit Union hit with class-action lawsuit over overdraft fees

Credit Human Federal Credit Union in San Antonio has been hit by a proposed class action lawsuit alleging overdraft fees on accounts that have not actually been overdrawn.

Credit Human is also accused of routinely charging multiple overdraft fees or insufficient funds for the same transaction.

The charges violate promises made in the customer account agreements, the complaint adds. The lawsuit describes the credit union’s overdraft practices as “unfair and incomprehensible”.

The lawsuit was brought by San Antonio-based Antoinette Hughes, but estimates the size of the potential class of plaintiffs at thousands. The credit union has more than 237,000 members. The lawsuit, which was filed in Bexar County’s District Court on Monday, provides for more than $ 1 million in damages.

Credit Human spokesman Chris Armstrong said he didn’t receive the complaint until Wednesday and made no immediate comment. The credit union had assets of approximately $ 3.6 billion as of December 31.

Credit Human joins a long list of financial institutions sued over the past several years for their overdraft practices.

Last year, a court approved a $ 70 million settlement in a case against TD Bank. The bank then agreed to pay a $ 97 million refund and a $ 25 million civil penalty to around 1.4 million customers to resolve allegations made by the Federal Bureau of Consumer Financial Protection.

In late 2019, USAA Federal Savings Bank in San Antonio reached a confidential settlement with a California woman who claimed the bank had put her three overdraft fees of $ 29 for a total of $ 87 each time she tried to get a single credit card bill of 358.85 USD to be paid through their bank account in 2018.

Overdraft fees are a tremendous source of income for financial institutions. U.S. consumers paid $ 15 billion in overdraft fees and check fees in 2016, Credit Karma reported earlier this year, citing data from the Consumer Financial Protection Bureau.

Credit Human’s overdraft fees and NSF fees have not sparked any complaints with the CFPB, the agency’s database shows.

Hughes’ lawsuit stems from Frost Bank – the largest regional bank based in San Antonio – has announced that it will not charge certain customers overdrafts by up to $ 100 on their checking accounts – as long as they make monthly direct deposits of have a total of $ 500.

“Frost understands that it is human to make a mistake and wants to show its customers that they matter by giving them this overdraft grace where they need it,” the bank said in a statement.

Frost previously charged $ 35 for each overdraft, up to $ 175 a day, spokesman Bill Day said. This is still true for overdrafts over $ 100, but most overdrafts are for less than that amount.

The bank has not determined what the change will cost the revenue. Overdrafts of $ 32.3 million and inadequate fund fees for consumer and trading accounts were generated last year, up from $ 42.3 million in 2019.

In her complaint against Credit Human, Hughes claims she attempted to make a $ 25 payment to Charter Communications in late 2018. Credit Human declined to pay for the transaction due to insufficient funds in her account and charged her an NSF fee of $ 25. She does not deny this fee.

But Credit Human declined two more payments, fetching $ 25 each time, the suit adds.

“The plaintiff understood this payment as a single transaction, as set out in Credit Human’s account documents, which can receive at most a single NSF fee,” the lawsuit said. “The same pattern occurred multiple times for the plaintiff, with Credit Human charging multiple fees for a single transaction.”

Hughes also objects to Credit Human’s alleged practice of charging overdraft fees for debit card transactions known as Authorize Positive, Purposeedly Settle Negative Transactions (APPSN).

According to Hughes’ lawsuit, once a debit card transaction is approved in an account with positive balance to fund the transaction, Credit Human will immediately reduce a customer’s checking account to cover the amount of that transaction.

As a result, a customer’s account will always have sufficient funds to cover debit card transactions as Credit Human has already set those funds aside for payment. In other words, the funds are not available to cover subsequent transactions.

This means that subsequent transactions may incur overdraft fees as the funds earmarked for those debit card transactions will not be available.

“Despite the blocking of these held funds for other transactions, Credit Human wrongly charges OD fees for these APPSN transactions, despite the APPSN transactions
have sufficient funds to be covered, ”says the lawsuit.

“There is no justification for these practices other than maximizing Credit Human’s OD fee income,” added the complaint.

The account agreement documents for overdraft fees specifically state that Credit Human will only charge such fees for transactions with insufficient funds, the lawsuit states.

Hughes claims that a debit card transaction is currently ready to be processed: “Credit Human does something new and unexpected for its customers in the middle of the night during the nightly batch posting process.

“In particular, Credit Human releases the blocked amount on the transaction for a fraction of a second, puts money back into the account and charges the same transaction a second time,” she adds. This “secret move” enables Credit Human to collect overdraft fees that should never have been charged.

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