Court gives preliminary OK to proposed settlement regarding dispute over Navy Federal Credit Union overdraft fee

By Carrie Salls | Oct 25, 2018

SAN DIEGO – The U.S. District Court for the Southern District of California recently granted preliminary approval to a proposed settlement between the Navy Federal Credit Union and customers who claimed the credit union “improperly assessed and collected optional overdraft protection fees (OOPS).” 

The court order entered Oct. 22 by U.S. District Judge Cynthia Bashant said that under the proposed settlement, all class members, defined as “all current and former Navy Federal members who were charged an OOPS fee on a transaction that was authorized into a positive available balance during the class period, excluding individuals who enrolled in OOPS for the first time after Feb. 13, 2017,” will receive a share of a $24.5 million settlement fund.

According to court filings, lead plaintiffs Jenna Lloyd and Jamie Plemon filed a suit claiming breach of contract, breach of the covenant of good faith and fair dealing, conversion and unjust enrichment against the credit union in June 2017. The suit alleged the credit union improperly collected fees on some debt card transactions.

“Specifically, plaintiffs alleged that pursuant to its account agreements with account holders, Navy Federal was not permitted to charge OOPS fees on debt card transactions that were authorized on an account with positive funds to cover the transaction but settled into a negative account balance,” the order said.

Following an April 12 ruling denying the credit union’s motion to dismiss the breach of contract and conversion claims but granting dismissal of the other claims, the court said the plaintiffs amended the lawsuit to only include the breach-of-contract charge.

The parties announced on Sept. 25 that they had reached the proposed settlement.

The court said the under the proposed settlement, the credit union also agreed to pay no more than $500,000 in costs related to the administration of the agreement. Epiq Class Action & Claims Solutions Inc. has been conditionally appointed as the settlement administrator.

The final hearing on the settlement is scheduled for April 22.

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