NEW HAVEN, Conn.–Connex Credit Union has become the latest to be hit with a lawsuit over its overdraft practices, with the plaintiff seeking class action status. Among the law firms representing the plaintiff is a firm that has been involved in numerous similar lawsuits.
The suit, filed in Superior Court in Connecticut, was filed by Donna Darden against the $965.6-million Connex CU for allegedly charging $35 overdraft fees on transactions that “did not actually overdraw checking accounts.”
The litigation is similar to that which has targeted numerous credit unions this year and in prior years, alleging so-called authorize positive, settle negative (APSN) practices that claim the ways credit unions process transactions creates overdrafts when funds were actually available. During CUNA’s GAC earlier this year, credit unions were warned such a wave of lawsuits were likely ahead in 2023, as CUToday.info reported here.
Numerous Violations Alleged
“…The Defendant’s practices violate Connecticut common law and, upon information and belief, the contract,” the suit reads. “These practices also unjustly enrich Defendant at its account holders’ expense and violates the Connecticut Unfair Practices Act.”
The lawsuit further alleges that overdrafts target the “most vulnerable,” specifically younger, “lower-income and non-white account holders,” and as a result big banks that include Bank of America, Capital One, Wells Fargo and others have announced plans to eliminate overdraft fees.
The suit calls Connex’s $35 fee “crippling.”
“Despite putting aside sufficient available funds for debit card transactions at the time those transactions were authorized, the Defendant later assessed OD Fees on those same transactions when they settle days later into a negative balance,” the suit alleges.
Additional Allegations
“Defendant maintains a running account balance, tracking funds consumers have for immediate use. This running account balance is adjusted, in real-time, to account for debit card transactions at the precise instance they are made. When a customer makes a purchase with a debit card, Defendant holds the funds needed to pay the transaction, subtracting the dollar amount of the transaction from the customer’s available balance. Such funds are not available for any other use by the account holder and specifically reserved for a given debit card transaction.”
The result, the lawsuit alleges, is that subsequent transactions overdraw the account because of the reserved funds.
“There is no justification for these practices, other than to maximize Defendant’s OD fee revenue,” the suit states.
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