Navy Federal Credit Union (NFCU) is on the receiving end of a proposed class action challenging its alleged practice of charging international service assessment fees for online purchases that took place within the United States.
According to the suit, NFCU charges a one-percent fee for online debit card purchases made in the U.S. and processed in foreign countries despite failing to authorize the fee within its Schedule of Fees and Charges. The case claims NFCU’s fee schedule, in fact, prohibits the charging of international transaction fees on purchases made from within the U.S., arguing that the credit union’s language regarding foreign transactions is “ambiguous at best.”
“At the very least, the Schedule is ambiguous as to whether ‘transactions made in foreign countries’ means in-person transaction made on foreign soil,” the complaint reads, adding that the defendant’s one-percent ISAF on online purchases made within the U.S. constitutes a breach of contract.
Per the complaint, international transaction fees, though appearing to be a “small, negligible amount,” have caused “tremendous harm” to consumers and significant profit for banks and credit unions.
The plaintiff says she used her NFCU checking account to make a $137.56 purchase from Chicme.com, an online women’s clothing retailer based in Cyprus, from her San Diego home. According to the suit, NFCU assessed the plaintiff a $1.38 ISAF in connection with the purchase despite being unauthorized to charge an international transaction fee given the purchase occurred within the U.S.
NFCU’s fee schedule provides that a one-percent international transaction fee may be applied to “point-of-sale and ATM transactions made in foreign countries,” the case explains. Based on the syntax used throughout the fee schedule, “the only reasonable interpretation” of the ISAF provision is that the fee may only be charged on purchases made physically outside the U.S., the complaint argues.
According to the suit, this reading “makes the most sense” from a policy standpoint given online consumers may not be aware of the country in which a vendor is based. From the complaint:
“NFCU accountholders will always know (or at least should know) if they are making an in-person purchase outside the United States, and so can rightly expect to be charged the 1% ISAF. However, the same cannot be said for NFCU accountholders making purchases from online vendors, many of whom do not conspicuously disclose (or in some cases, not at all) that they are based outside the United States.”
The plaintiff says she was indeed unaware that Chicme.com was based outside the U.S. at the time she made her purchase, and could only learn that the company was based out of Cyprus by “combing the website’s terms and conditions.”
According to the case, NFCU has taken advantage of consumers by failing to define “made in foreign countries” within its fee schedule and unilaterally interpreting such to include online transactions made from within the U.S.
“By failing to define the term ‘made in foreign countries’ NFCU has opportunistically abused this silence and surreptitiously charged ISAFs when they could not be reasonably expected based on the contract,” the complaint says.
The plaintiff looks to represent all NCFU checking accountholders who, within the applicable statute of limitations, were assessed an International Service Assessment Fee for an online purchase made from within the U.S. The case also proposes to cover a subclass of California accountholders fitting the same criteria.
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