Navy Federal Credit Union Unlawfully Fails to Reimburse Consumers for Fraudulent Charges, Class Action Alleges [UPDATE]

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A proposed class action claims Navy Federal Credit Union (NFCU) has violated federal law by refusing to reimburse accountholders who fell victim to theft or fraud without conducting “genuine, good faith” investigations into the disputed transactions or providing a detailed explanation of its findings.

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The 21-page lawsuit was filed by a California resident who claims he promptly notified NFCU in February 2023 after the debit card he shares with his son was stolen and used to make $991.98-worth of fraudulent purchases. Just one day after the plaintiff submitted a “detailed account” with “supporting factual proof” demonstrating that the charges were fraudulent, NFCU denied the claim on the grounds that “no error has occurred,” without offering any further details about how it came to its decision, the complaint says.

According to the filing, NFCU denied two more claims submitted by the plaintiff in March and April 2023 without providing any substantive explanation or justification, stating that the man would be responsible for the full amount of the disputed transactions.

Under Regulation E of the Electronic Funds Transfer Act (EFTA), financial institutions like NFCU are required to maintain thorough practices for error resolution, the case explains. Ultimately, the EFTA places the burden of proof on the financial institution to demonstrate that challenged transactions were authorized, the filing relays.

“By denying Plaintiff’s claim on the unsupported ground that ‘no error occurred’ after just one day of conducting a purported ‘investigation’ and by failing to provide a detailed explanation of its findings and justification for its denial, NFCU flouts the EFTA and Regulation E’s investigation and error resolution requirements,” the complaint says, arguing that NFUC “ultimately fails to satisfy its burden of proving that the unauthorized transactions as reported by Plaintiff were in fact authorized.”

Regulation E of the EFTA also states that if a consumer notifies their financial institution within two business days after discovering unauthorized charges on their account, they cannot be held liable for more than $50 worth of purchases, the suit shares.

Similarly, NFCU’s debit card disclosure promises accountholders that “[i]f you notify us within 2 business days after you learn of the loss or theft of you [debit card] or PIN, your losses will be no more than $50 if someone used your [debit card] or PIN without your permission,” the lawsuit relays.

“NFCU, however, never limited Plaintiff’s liability to $50 despite the fact that he promptly notified NFCU that he suspected fraud upon learning of the missing debit card and unauthorized transactions,” the case contends.

Per the complaint, NFCU also failed to abide by the “zero liability” policy laid out in its debit card disclosure, which states that consumers will not be held responsible for confirmed fraudulent transactions should the consumer report the charges within 60 days after they occur.

The suit stresses that the defendant’s “flagrant disregard” of its obligations under the EFTA and Regulation E has unfairly and unlawfully forced victims to shoulder hundreds of dollars in purchases arising from fraud or theft that was out of their control.

The lawsuit looks to represent any Navy Federal Credit Union accountholders who, during the applicable statute of limitations period, notified the defendant that one or more charges on their account were unauthorized and were denied reimbursement without any written explanation of its investigation and findings.

The suit also seeks to cover any Navy Federal Credit Union accountholders who, during the applicable statute of limitations period, had an unauthorized charge on their account and were denied reimbursement by the defendant.

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