A federal judge has agreed to let a class action suit against Portsmouth, N.H.-based Northeast Credit Union proceed after granting some of the defendant’s motions to dismiss the case but denying others.

The suit, originally filed in the United States District Court for the District of New Hampshire by Joseph Walbridge, alleges that Walbridge, a Northeast FCU member, was charged overdraft fees by the credit union based on his available balance rather than his actual balance or ledger balance. The difference between the available balance and the actual balance results from the way that Northeast CU credits deposits made to an account and reduces the balance by debits that are pending but not yet paid. As a result, the court filing explained, the available balance can be “less, and even considerably less,” than the actual balance, depending on the delay in crediting deposits and the anticipatory deductions of pending debits.

Northeast CU then assesses an overdraft fee when the available balance is insufficient to cover a transaction, even though the actual balance shows enough money to cover the transaction.

Walbridge alleges that on March 15, 2016, he had an actual balance in his Northeast CU checking account of $111.09. He made a debit card payment of $32.43, which left a balance of $78.66. Northeast, however, determined that he had “insufficient funds” and charged an overdraft fee of $32. The credit union then allegedly assessed additional overdraft fees of $32.00 on March 29 and March 30, 2016.

Court documents claim Walbridge believes subsequent improper overdraft fees were charged but provide no allegations in support.

Walbridge’s suit alleges breach of contract, breach of the implied duty of good faith and fair dealing and unjust enrichment, among other claims.

Northeast CU had moved to dismiss all claims, arguing, among other things, that it did not promise to use the actual balance for its overdraft service and instead properly explained its overdraft policy based on the available balance.

According to court documents, the federal court has set a two-week trial period beginning on Sept. 4, 2019.

Dozens of similar suits nationwide

Michael Bell, Howard & Howard
Michael Bell, attorney, Howard & Howard

Michael M. Bell, a Michigan-based attorney who represents credit unions in class action matters (but is not involved in the Northeast CU suit), commented that this case looks like a "typical and standard" overdraft lawsuit. "These suits have been making the rounds," he said. "We successfully defended LGE Community CU in Georgia against this [same issue] and are actively defending two others."

Bell says there are probably about 30 similar cases currently pending nationally. "None have gone all the way to a jury/judge verdict yet," he added. "Only three of four have been dismissed or won by the credit union prior to trial. Quite a few credit unions have decided to settle. In general we recommend an aggressive defense strategy that is not focused on a settlement."

According to its call reports, Northeast CU generated fee income of about $6.7 million in 2017, up from $5.8 million in the prior year.

The credit union generated net income of about $9.3 million in 2017, up from $7.4 million in the previous year.

Subscribe Now

Authoritative analysis and perspective for every segment of the credit union industry

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.