SAN JOSE, Calif. – Big credit unions are being targeted anew for their practices on overdrafts for debit transactions, with three new class action suits filed yesterday in federal court here charging Star One CU, Kern Schools FCU and SchoolsFirst FCU with unfair and deceptive practices regarding their use of “batching,” or paying off the biggest transactions before the most recent.
The suits were filed by the same group of lawyers that has targeted banks in the past two years over their overdraft practices and follows a similar suit filed Wednesday against Alabama’s America’s First FCU. A suit filed in April against Xceed Financial FCU makes similar claims.
The suits pose significant financial peril for credit unions as they follow similar civil claims against banks, many of which agreed to pay multi-million dollar settlements. Among the banks agreeing to pay settlements are: JP Morgan Chase, Bank of Hawaii, Fifth Third Bancorp, UMB Bank and Bank of America, which paid out $410 million to settle its suit.
The new credit union suits all appear to have been generated by a nationwide solicitation by attorneys through the website classaction.org., where they ask, “If you have been hit with an unfair overdraft fee from your state or regional bank, you may be eligible to participate in litigation against your bank and recover compensation.
Lawyers in the new credit union suits are affiliated with Jacoby & Myers, the well-known litigation firm that has a national reach. Lawyers involved in the Alabama suit did not return phone calls seeking comment from the Credit Union Journal.
The three new suits are all identical and claim the credit unions unfairly ordered the payments on debit transactions so instead of paying the most recent debits first they pay the largest ones first, thus causing overdrafts and earning additional fees.