Overdraft / NSF Fee Lawsuits Target Reg E’s Model Opt-in Form

CUNA Mutual Group Risk Alert

In overdraft / NSF fee lawsuits alleging credit unions improperly charged overdraft and/or NSF fees, plaintiffs’ attorneys have started targeting Reg E’s Model A-9 opt-in form for paying overdrafts from ATM and one-time debit card transactions. They argue that the opt-in form creates ambiguity on how credit unions assess overdraft fees and, therefore, fails to comply with Reg E. Since a noncompliant opt-in form is used, plaintiffs’ attorneys claim that credit unions may not assess overdraft fees on ATM and debit card transactions that overdraw the account.

Recent overdraft / NSF fee lawsuits have plaintiffs’ attorneys targeting Reg E’s Model A-9 opt-in form for ATM and one-time debit card transactions. They claim the opt-in form is ambiguous on how credit unions assess overdraft fees and therefore fails to comply with Reg E requirements.

They cite the following sentence: “An overdraft occurs when you do not have enough money in your account to cover a transaction, but we pay it anyway.” Since a noncompliant opt-in form is used, plaintiffs’ attorneys claim credit unions may not assess overdraft fees for ATM and one-time debit card transactions that overdraw the account. It should be noted that the Eleventh Circuit Court of Appeals, in the Tims case, ruled that a financial institution potentially violates Reg E by failing to disclose in its opt-in form that it uses the available balance method to calculate overdraft fees.

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