Gordon Rees Scully Mansukhani partners Peter G. Siachos and Eric T. Evans, with the assistance of associate Qing H. Guo, successfully secured a complete dismissal of a putative class action regarding checking account overdraft fees against the firm's client, a New Jersey credit union. The plaintiffs, checking account holders of the credit union, claimed that they were wrongfully assessed tens of millions of dollars in overdraft fees because they purportedly had sufficient funds in their checking account to cover checks under a "ledger balance methodology.” A ledger-balance method factors in only settled transactions in calculating an account’s balance; an available-balance method calculates an account’s balance based on electronic transactions that the institutions have authorized but have not yet settled, along with settled transactions. An available balance also reflects holds on deposits that have not yet cleared.
In other words, the plaintiffs contended that pending debits from their accounts, such as recent debit card transactions, e-checks, ACH withdrawals, pre-authorizations and the such — though pending but not yet settled — should not have been debited from the plaintiffs’ accounts when they wrote checks that, in the credit union’s eyes, were not backed by sufficient account funds. In dismissing the complaint, the court rejected the plaintiffs’ claims, finding the plain language of the membership agreement provided that the available balance (and not the ledger balance) was used for assessing overdraft fees. The court found that the agreement mentioned the term "available balance” multiple times, and that the agreement was clear enough that the plaintiffs should have used due diligence to understand their rights and obligations — including whether pending and unsettled transactions would affect their available balance.
This is a tremendous victory for the firm's client, a not-for-profit institution that provides credit to the underserved community. As member-owned and cooperative institution, credit unions provide a safe place for its members to save and borrow at reasonable rates. Credit unions also operate to promote the well-being of its members; meaning profits made by the credit union are returned to its members in the form of reduced fees, higher savings rates, and lower loan rates. Both the client and the firm are thrilled with this result.