HONOLULU John M. Floyd & Associates filed suit against Kaua’i Government Employees FCU this week, claiming the credit union is using methods Floyd laid out in an overdraft privilege program contract eventually cancelled to earn new revenue on overdraft protection.
According to the suit, filed in U.S. District Court for the District of Hawaii, the credit union agreed to a five-year agreement with Floyd in 2007. A Floyd representative allegedly made a series of presentations, which included training of employees and recommendations. In September 2010, Floyd performed an Internet presentation of its overdraft software and the credit union agreed to go live in November 2010, according to the suit.
However, Kaua’i Government Employees abruptly cancelled the agreement in September 2010, the suit says.
Floyd alleges the credit union is using the company’s overdraft protection practices anyway to boost its fee income. According to the suit, the credit union earned an average of $193,400 in non-interest fee income from 2006 through 2010, then earned $274,000 in non-fee income in 2011, and $347,000 in 2012, despite no major increases in the number of accounts or amount of deposits it was holding.
Floyd claims the credit union breached the Overdraft Protection Privilege agreement by using the recommendations it included without the company’s consent.
Officials with the credit union did not immediately respond to a request for comment.
The suit seeks damages and attorneys’ fees.
