ONTARIO, Calif.-The California and Nevada Credit Union Leagues is considering filing countersuits in response to several of the Golden State's CUs being named in lawsuits alleging improper overdraft policies and practices.
Diana Dykstra, president and CEO of the leagues, told Credit Union Journal consumer protection laws are set up to protect people from "bad practices" by financial institutions, "but we need to defend our credit unions that did not follow bad practices."
Numerous banks, both inside and out of California, have also been the targets of similar suits making similar allegations and seeking damages. Most recently, US Bancorp settled a $55-million class action suit that alleged it had engaged in unfair business practices by processing debit transactions from largest to smallest, in order to generate overdraft income. Earlier, BofA paid $410 million.
"Credit unions that are the target of these lawsuits are forced to expend money on attorneys, and when the local media reports on the suits there is reputation risk to the credit unions," Dykstra said. "Credit unions are not doing these practices. When attorneys are clearly fishing to try to extort a settlement and are not using duty of care in determining if CUs are deploying bad practices, something needs to be done.
"Outside the defense of the claims themselves, we want to look into what we can do proactively to address the attorneys filing these claims and, if they are not following duty of care, what we can do."
Attempts to reach Fernando F. Chavez, a San Jose, Calif.-based attorney identified as counsel for at least some of the plaintiffs in overdraft lawsuits against CUs were not returned at presstime.
CUs named as defendants in such suits include California-based Kern Schools FCU, Star One CU, SchoolsFirst FCU, Educational Employees CU, and Chicago-based Alliant CU.