Law firms have started using social media and web advertising to recruit class action plaintiffs to sue credit unions regarding their overdraft practices and disclosures. Demand letters or complaints filed may make several allegations, including:

• Violations of EFTA and Reg. E, even where the credit union uses the Model A-9 form.
• Breach of contract due to unclear or ambiguous terminology in account agreements, such as lack of clarity as to how the credit union will determine that there are insufficient funds in the account.
• Violations of state consumer laws, such as California’s Unfair Competition Law, New York’s statute addressing deceptive acts and practices, or New Jersey’s Consumer Fraud Act.

Strunk agrees with the risk mitigation recommendations from the CUNA: Credit unions should review their processes for handling reinitiated/resubmitted incoming electronic debits to member accounts that the credit union previously returned unpaid due to insufficient or uncollected funds resulting in an NSF fee. If your credit union charges another NSF fee for reinitiated/resubmitted items that are returned unpaid again, review your account agreement to ensure it discloses that NSF fees may be imposed on the same transaction.

If your credit union assesses overdraft fees based on available balance rather than actual balance/ledger balance, review your account agreement to ensure it contains a description of how certain transactions, such as debit card pre-authorization holds and check holds, impact the available balance, including examples of each. For debit card pre-authorization holds, ensure the account agreement discloses how subsequent debits to the account impact the available balance and that an overdraft fee could be assessed when the debit card transaction posts to the account taking it negative.

It has always been Strunk’s recommendation to precisely disclose the method used to calculate available balance in your account agreement. Because Strunk ODP documents refer to the use of Available Balance, which should be properly disclosed in the member account agreement, there are currently no recommended changes to Strunk’s ODP documentation. We will provide additional information if there are any upcoming changes to our disclosure documentation.