Federal Court Permits Overdraft and ATM Fees Class Action Claims to Proceed

The U.S. District Court for the Northern District of New York recently denied, in large part, a credit union’s motion to dismiss, permitting a class action concerning ATM and overdraft fees to proceed.  The court allowed the plaintiffs to continue to pursue allegations that the credit union breached its membership agreement and New York General Business Law § 349 by assessing multiple non-sufficient funds (NSF) fees, ATM out of network fees, and overdraft fees on Authorize Positive, Settle Negative (APSN) transactions.  The court, however, dismissed a claim for a breach of the implied covenant of good faith and fair dealing. 

The court permitted the majority of the plaintiffs’ claims, for breach of contract and for violation of New York General Business Law § 349, to proceed.  In parsing the credit union’s membership agreement, the court concluded that its overdraft and ATM fees provisions contained ambiguous language concerning the application of the fees at issue.  Because both parties had reasonable interpretations of the contractual provisions, dismissal was inappropriate.  In addition, the court permitted the New York state law claims to proceed because by alleging that the defendant concealed the fee charges, the plaintiffs properly alleged materially misleading conduct that caused them injury.  Finally, the court found that the Truth in Savings Act (TISA) did not preempt plaintiffs’ claims because they alleged breach of contract and corresponding misrepresentations; they did not challenge the credit union’s authority to impose the fees.

However, the court dismissed the implied covenant claim for being “duplicative” of the breach of contract claim.  The plaintiffs’ only basis for this claim arose from same set of factual allegations as their breach of contract claim and a conclusion that the defendant failed to “exercise its power fairly and in good faith” by charging these fees.