Cabrillo Credit Union and BBVA USA have been hit with separate proposed class action lawsuits over alleged violations of the federal Electronic Funds Transfer Act (EFTA) and California’s Unfair Competition Law.
The similarly worded lawsuits claim San Diego-based credit union Cabrillo and Birmingham, Alabama-headquartered bank BBVA have unlawfully failed to provide customers with a complete, accurate, clear, easily understandable, stand-alone disclosure document before assessing overdraft fees on one-time credit and ATM transactions, and did not obtain affirmative consent of customers’ opt-in to the institutions’ overdraft programs.
Regulation E of the EFTA requires financial institutions to provide members with an opt-in disclosure agreement describing the credit union or bank’s overdraft services, the suits say. The defendants’ respective Regulation E opt-in disclosure agreements fail in a number of ways, according to the complaints, which allege BBVA and Cabrillo’s respective documents provided customers with “ambiguous and misleading” language concerning overdraft charges.
First and foremost, Cabrillo’s overdraft disclosure does not clearly describe the circumstances under which the credit union will charge an overdraft fee, the case claims. Specifically, the opt-in disclosure agreement does not relay that Cabrillo will use an “internal artificial account balance,” instead of a customer’s official and actual balance, to determine whether a debit card or ATM transaction will be considered overdrawn, according to the complaint. Cabrillo’s opt-in disclosure not only fails to mention the use of an internal artificial account balance but uses language that conveys inaccurately that the defendant will use the customer’s true account balance to assess overdraft fees, the case claims.
Moreover, Cabrillo’s opt-in disclosure fails to relay the defendant’s full array of overdraft services, including its policies concerning the payment of overdrafts for transactions such as checks, ACH transactions and automatic bill payments, the lawsuit says. Additionally, though the disclosure references “overdraft protection,” there is no description as to what the protection is or does, the case argues, claiming Cabrillo’s opt-in disclosure also fails to state the maximum number of overdraft charges that can be accessed per day, or that there is no limit to such.
As the suit tells it, Cabrillo’s shortcomings with regard to federal and California overdraft disclosures mean the overdraft fees assessed by the bank are therefore unlawful.
“Because Regulation E does not permit credit unions to charge overdraft fees without affirmative consent based on a proper and accurate disclosure of its overdraft practices in its stand-alone opt-in disclosure agreement, Cabrillo’s assessment of all overdraft fees against members for one-time debit card and ATM transactions has been and continues to be illegal,” the case argues.
The lawsuit against BBVA makes similar claims, alleging the bank fails to relay the circumstances under which it will charge an overdraft fee or whether an internal artificial account balance is used to determine whether an account is overdrawn. Given the apparent Regulation E abuses, all overdraft fees charged by BBVA for one-time debit card and ATM transactions are and continue to be illegal, the suit claims.
Both cases say the defendants’ definitions of “overdraft” serve to line the institutions’ pockets in that their assessment of fees is based on the “available balance” that factors into credit and debit holds, which causes “approximately 10-20%” of overdraft fees to be levied on transactions for which there was enough money in a customer’s account to cover the transaction at the time it was posted and paid, and the bank and credit union did not advance or loan a customer any money to cover the transaction.
The complaints can be found below.
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