Mazuma Credit Union in Overland Park, Kan., agreed to pay almost $1.4 million to settle a class action lawsuit related to its overdraft fees.
The suit alleged that the $662 million-asset Mazuma was in breach of contract by charging members overdraft fees for transactions when there were sufficient funds in the checking accounts to cover the purchases.
In the lawsuit against Mazuma, the credit union was accused of using the “available balance” instead of “current balance” in determining the funds in members’ accounts. Using the “available balance” to assess overdraft fees contradicted the language of member account agreements, the lawsuit alleged.
Any credit union member who had a checking account at Mazuma between April 2011 and Sept. 30, 2015, and was charged overdraft fees is eligible to receive compensation, according to the
Mazuma also agreed that as of the beginning of this year to assess overdraft fees based on the "current balance" in a member's account instead of the “available balance” as the credit union had done before the lawsuit. Mazuma and the plaintiffs agreed that this change would have reduced the total amount of overdraft fees charged by about $3 million over the previous four years.
In a statement emailed to Credit Union Journal, attorneys for the credit union wrote: "Plaintiff filed a class action lawsuit against Mazuma alleging that Mazuma improperly charged overdraft fees based on a member's available account balance. While Mazuma denies any wrongdoing, the parties have agreed to settle the claims to avoid the uncertainty, expense and inconvenience associated with continued litigation. Mazuma believes that this settlement is in the best interest of Mazuma and its members, and will allow Mazuma to continue to focus on the future and providing innovative services to its members."
In court documents, lead plaintiff Joy L. Bowens alleged Mazuma also coerced consumers into opting into its overdraft program. The
According to the suit, Bowens opened her Mazuma credit union account at a branch in Kansas City in July 1998. Bowens alleged that Mazuma’s automated program incorrectly determined she had insufficient funds in her account and charged a fee.
For example, the complaint alleges that on Jan. 12, 2015, Bowens had a balance of $96.98 in the morning. She then posted two transactions, including a debit card transaction for $20 at a Shell and a $7.99 Netflix charge. Despite the fact that the plaintiff had sufficient funds to cover both of those transactions, Bowens was charged a $28 overdraft fee for each transaction.
In its response to the complaint, Mazuma denied the accuracy of those allegations.
This story was edited at 4:05 P.M. on Dec. 12, 2018.
