LOS ANGELES – In what is expected to be the start of a new spate of consumer lawsuits against credit unions, a member of Xceed Financial FCU is claiming the credit union engaged in deceptive and unfair practices by re-sequencing his debit transactions in order to create overdrafts in his accounts.
In a purported class action suit filed in U.S. District Court for the Central District of Los Angeles, Cuthbert Shillingford claims the $750 million El Segundo-based credit union engages in so-called batching of debit transactions to pay off the biggest debits first, which causes additional overdrafts and attendant fees.
The charges are similar to those forcing numerous big banks to pay millions of dollars in settlements and come as a class action group in Washington is soliciting potential overdraft suits against credit unions across the country. Over the past year dozens of banks have entered into multi-million-dollar settlements to end similar overdraft suits, including Intrust Bank, JP Morgan Chase, Bank of Hawaii, Fifth Third Bancorp, UMB Bank and Bank of America, which paid out $410 million to settle its suit.
Shillingford, who has been a member of Xceed the past four years, said the practice of re-sequencing, or batch processing, has caused him to pay fees on dozens of overdrafts by having his checking account depleted quicker than if the transactions were deducted in chronological order. He is seeking more than $5 million in damages for what he describes as a class of Xceed members that could numbers in the tens of thousands.
Representatives of Xceed, the one-time Xerox Employees FCU, did not immediately return a phone call seeking comment.
According to the suit, there are two ways Xceed re-sequences transactions. First, by processing large-dollar transactions before low-dollar transactions, no matter which transactions occurred first. And second, by re-sequencing transactions that occur on different days as if they occurred on the same day. The practice, according to the suit, results in multiple overdrafts when only one might have occurred.
Through the regular use of his debit card, Shillingford says he was charged repeated overdraft fees of $29, which the credit union automatically debits from his checking account. “However,” says the suit, “some of these excessive overdraft fees were not proper and were the result of Xceed’s re-sequencing of his transactions.”
“Thus, Xceed manipulates customer transactions to obtain overdraft fees at the expense of its customers,” claims the suit.
The new suit comes as a group calling itself classaction.org is soliciting credit union members all over the country to file new overdraft suits. The group has posted invitations on the internet inviting members of Mountain America CU, Metro CU, Redstone FCU, Orange County CU, Trans CU, and SRP FCU, as well as numerous banks, to serve as plaintiffs for potential suits.
