VyStar Credit Union Accused of Assessing NSF Fees Multiple Times for Same Transaction

August 8, 2019, 3:45PM. By Anne Wallace

Is it a pattern of fee overreach?

Jacksonville, FLA class action lawsuit filed in Jacksonville Circuit Court claims that VyStar Credit Union routinely assessed multiple insufficient funds charges on the same transaction without authorization by the customer. In her excessive overdraft fee lawsuit, Heather Washington alleges that VyStar charged three separate $32 overdraft fees on a single transaction, in violation of the terms of her Deposit Agreement with the credit union.

Over the last twenty years, banks and credit unions have increasingly relied on fees, including overdraft fees, rather than interest income as a source of revenue. VyStar’s alleged practice of charging multiple times for the same transaction seems to be yet another example of what many customers may see as overreach.

VyStar’s NSF practices

Washington acknowledges that, in November 2018, she attempted to make an electronic payment to AT&T. VyStar rejected it because she had insufficient funds in her checking account and, as permitted under the Deposit Agreement, charged her $32. So far, no problem.

Thereafter, however, VyStar charged her twice more for the transaction, without her authorization or request for resubmission. The total charge came to $96. She alleges that this is a common practice and filed a class action lawsuit on behalf of all similarly situated Florida VyStar customers.

The text of the Deposit Agreement makes no mention of multiple charges for either electronic fund transfers or “checks, drafts or other transactions” rejected because the available funds in an account are insufficient. The separate fee schedule similarly lists a single charge of $32 for non-sufficient funds.

VyStar has more than 665,000 members in Florida and Southeast Georgia and describes itself as the 16th largest credit union in the country. If, in fact, the practice of assessing multiple fees on a single rejected transaction is widespread, the class of affected consumers could be very large.

VyStar may also maximize fees through re-ordering and automatic “overdraft protection” enrollment

The same Deposit Agreement also permits Vystar to automatically enroll customers in its overdraft protection plan and then to hold deposits and re-order transactions in ways that may maximize the overdraft fees that are due under the plan.

If, to use a simple example, an account holder has $100 in a checking account and writes checks or makes ATM withdrawals for $20, $50 and $80 and the transactions are processed in that order, one overdraft fee would be due on the final $80 transaction. If the transactions were processed from greatest to least, however, two overdraft fees – on both the $50 and $20 transactions – would be due.

The gain to the bank or credit union is relatively small on a per customer basis. Individual customers may be unlikely to bring lawsuits for the amounts involved. If repeated a sufficient number of times on an institutional basis that affects thousands of customers, it can become a noticeable source of revenue for the banking institution.

The situation may be exacerbated by the fact that, as VyStar notes in the Deposit Agreement, it does not undertake to notify customers of individual overdrafts:

“If, on any day, the available funds in your account are not suffcient [sic] to pay the full amount of a check, draft, transaction, or other item, plus any applicable fee, we may return the item or pay it, as described below. We do not have to notify you if your account does not have sufficient [sic] funds available to pay an item.”

This is not a situation designed to give customers either information or control.

Widespread overdraft fee issue

The Consumer Financial Protection Bureau (“CFPB”) has been concerned since 2015 about the harm that excessive overdraft fees do to consumers. Further, the customers who are assessed overdraft fees are the most financially vulnerable and the most likely to lose out on the opportunity for upward mobility that an established banking relationship represents. They are also the least likely to sue.

Even after years of scrutiny, however, the problem does not seem to have abated. At the beginning of 2019, the headline in an industry publication predicted, “Credit Unions Need to Lawyer Up for 2019.” More than half way through the year, it still seems to ring true.

The excessive overdraft lawsuit against VyStar may be the latest in the history of this litigation, but it is not likely to be the last. This appears to be just a new mutation in the ongoing banking consumer dispute.

Double or triple charging for an overdraft at $32 seems like penny ante stuff. But it makes a difference for consumers on the stairway way up to financial stability.