SAN DIEGO—Navy FCU has agreed to a $1.7-million settlement to resolve a proposed class action alleging it failed to comply with federal rules on investigating suspected fraud and notifying members of the results.
Under the proposed agreement—pending approval from U.S. District Judge William Q. Hayes in the Southern District of California—the nation’s largest credit union will also revise the written explanations it sends to members.
In a filing this week, Navy Federal members Jeffrey Stephenson and Billy Smith II ask Judge Hayes to grant preliminary approval to their settlement deal, describing it as "an excellent result" for their class members, Law360 reported.
"Class counsel believes that the contemplated benefits addressed below adequately compensate the settlement classes for the claims they are releasing," the members stated.
In the latest version of their claims, from October 2024, Stephenson and Smith accuse Navy Federal of mishandling fraud claims they filed, Law360 explained.
Specifically, Stephenson claims that Navy Federal summarily rejected a claim he filed over nearly $1,000 in fraudulent transactions that took place after a debit card for an account he jointly owned with his teenage son went missing from his son's backpack, Law360 said.
"[J]ust one day after plaintiff Stephenson submitted his fraud claim — NFCU sent a letter informing plaintiff Stephenson of its 'final determination' of the fraud claim in which it concluded that 'no error has occurred,'" the complaint states.
Stephenson requested a second review of his fraud claim and eventually filed complaints with the Consumer Financial Protection Bureau and the Better Business Bureau. Despite these efforts, he was unable to get Navy Federal to reverse what he describes as an improper finding, as each of these efforts only resulted in the credit union "regurgitating the same response devoid of any rationale or factual support," the complaint says, according to Law360.
Smith, meanwhile, said he had fallen victim to fraud when his phone was stolen during a trip, resulting in unauthorized withdrawals and transfers totaling roughly $9,800.
Navy Federal denied Smith's claim days after he had filed it, telling him, among other things, that "based on the facts surrounding the use of your account, we have found that you benefited from the transaction[s]," the complaint says, according to Law360.
"Needless to say, plaintiff Smith was shocked as these transactions took place after his phone was stolen and he did not receive any benefit from them, let alone know who or what they were for," the complaint states.
The members claim in their suit that they "were given no opportunity to contest NFCU's reasoning for denying their fraud claims or any explanation as to how NFCU reached its conclusion,” Law360 added.