DURHAM, N.C.— The $2.4-billion Self-Help Credit Union has filed suit against Fiserv accusing the company of misrepresenting whether it had implemented multi-factor authentication on systems that store and process credit union member information.
"The legal action comes as Fiserv’s stock price has fallen sharply, nearly 70% over the past year, underscoring growing concern about the company's business practices," stated NERKO PLLC, which is representing Self-Help.
The complaint states that Fiserv relied on an “email passcode challenge” to access systems containing sensitive member data, and contends that the approach left those systems insecure because it conflicted with Fiserv’s Master Agreement and with federal cybersecurity standards that prohibit using email passcodes as multi-factor authentication, NERKO PLLC said.
The suit also accuses Fiserv of fraud, alleging that the company repeatedly assured financial institution customers of a strong security posture while concealing material deficiencies, NERKO PLLC said.
"Alongside claims for breach of contract and fraud, the complaint seeks restitution for fees Self-Help says it paid for services that were not delivered as promised. It also contests Fiserv’s seven-figure early-termination fee, which Self-Help describes as a punitive, ransom-like charge that, it says, discourages credit unions from leaving even when significant performance and security issues emerge," NERKO PLLC said.
“This case raises a broader question for credit unions: what accountability should look like when a core processor does not meet key performance and security commitments and then seeks a significant early-termination fee," said NERKO PLLC Managing Partner Charles Nerko, who has represented five other credit unions in litigation against Fiserv. "Vendors should earn long-term relationships with credit unions through reliable performance and appropriate safeguards, not penalty-driven leverage. Self-Help will diligently pursue its claims through the legal process. We expect this case will interest credit union leaders focused on third-party vendor costs, accountability, and operational risk.”