MidFlorida CU to Pay $2.375 Million in Overdraft Suit

MidFlorida CU to Pay $2.375 Million in Overdraft Suit
July 5, 2017 Marketing GrafWebCUSO

Lakeland, Fla.-based MidFlorida Credit Union has agreed to pay $2.375 million to settle a class-action lawsuit regarding its overdraft fee practices.

The settlement requires MidFlorida CU, which has $2.9 billion in assets and 271,000 members, to pay members for overdraft fees assessed between November 24, 2010, and January 15, 2016, if those fees occurred when the member had sufficient ledger balances but insufficient available balances. According to a database analyst hired by the plaintiffs, about 27,500 accounts were affected. 

The class-action suit was originally filed by plaintiff Tracy Fry in November 2015. Fry claimed the practice breached MidFlorida’s opt-in agreement and was inconsistent with its disclosure materials. The case went to mediation in March 2017, and a U.S. District Court judge approved the settlement this week. 

“MidFlorida does not deny it charged overdraft fees but contends it did so properly and in accordance with the terms of its agreements and applicable law because MidFlorida assesses overdrafts based on the available balance in a member’s account,” the credit union said in court documents filed this week.

“MidFlorida maintains that this practice is proper and was disclosed to its members, and therefore denies that its practices give rise to claims for damages by Ms. Fry or any class member,” it added. “Nevertheless, because MidFlorida states it has always strived to conduct its business in a manner that is most beneficial to all of its members, and using ledger balance may result in fewer member overdrafts as a result of this lawsuit, MidFlorida changed its payment processing systems as of January 15, 2016, so that it now assesses overdrafts based only on the ledger balance in member accounts.”

The database analyst estimated in a statement filed with the court that the credit union has forgone approximately $1.15 million in overdraft fees in the year after it changed its overdraft method in January 2016. 

As much as $1.125 million of the settlement, plus up to $65,000 in litigation costs, could go to the plaintiffs’ attorneys. Another $10,000 will go to Fry, according to court documents. Members will be paid a pro rata share of the net settlement based on the total amount of improper overdraft fees they paid. MidFlorida has the option to terminate the settlement agreement if at least 5% of the class members opt out of the settlement before November 9. 

Taras Kick, one of the lead attorneys for the plaintiff, told the court he believed the total recovery would have been just over $5 million had the case gone to trial.

MidFlorida Credit Union is one of over a dozen credit unions around the country have been hit with class-action suits over their overdraft practices. In at least two cases, the credit unions countersued, arguing that the plaintiffs still owed them money. In early 2016, a judicial panel denied a request to consolidate several of the lawsuits, leaving courts to weigh the merits of each case individually. Several of the credit unions have settled their cases or notified the court that settlement discussions are happening.