CFPB Fines Large Credit Union for Overdraft Fees, Requires Refunds

The CFPB recently entered into a consent order with a large national credit union for charging overdraft fees in connection with debit card transactions that were authorized against sufficient funds, as well as transactions that resulted in overdrafts despite consumers transferring additional funds into their accounts through peer-to-peer or similar payment networks.  The CFPB alleged that these overdraft charges were unfair acts and practices, in violation of the Consumer Financial Protection Act.  Although the credit union did not admit any wrongdoing, it agreed to resolve the matter by refunding its members more than $80 million in overdraft fees and paying the CFPB a $15 million civil money penalty.

The consent order targets overdraft fees that resulted from either of two situations:

• Debit card transactions occurring between 2020 and 2022 that were authorized by the credit union on a sufficient balance but later settled with an insufficient balance at the time the credit union paid the merchant on the transaction; and

• Debit transactions occurring between 2017 and 2020 that a consumer “reasonably believed” would be drawn on sufficient funds due to a transfer of funds into the consumer’s account using a payment network (such as PayPal, Cash App or Zelle) but resulted in an overdraft because the credit union did not credit transfers made after a certain time of day, which it allegedly did not disclose to consumers.