Elizabeth Eiess of California alleges that she was hit with three $29 overdraft charges, for a total of $87, by San Antonio’s USAA Federal Savings Bank when she tried to pay a $358.85 credit card bill using her bank account.
So Eiess filed a federal class-action lawsuit against USAA alleging that it breached the terms of its deposit agreement that expressly states that the bank will charge only one nonsufficient funds fee for each transaction.
USAA responded by asking a court in San Francisco to compel the parties to arbitrate the dispute, as spelled out in the agreement.
On Friday, a judge granted in part and denied in part USAA’s request.
U.S. District Judge Edward M. Chen ruled that Eiess’ claim for injunctive relief — an order prohibiting USAA from making misrepresentations to the public regarding its NSF fee policy — must be litigated before the court.
Chen, however, ruled that claims for breach of contract and monetary relief, including restitution, should be arbitrated by each potential class member.
“USAA Bank is pleased with the court’s ruling and will not comment further because the litigation is still pending,” spokesman Matt Hartwig said in an email.
Eiess’ lawyers didn’t respond to requests for comment, so it’s not clear if they will be willing to arbitrate individual claims of each potential class member.
Bloomberg Law first reported on Chen’s ruling.
Eiess filed suit Jan. 8, five days after USAA Bank agreed to pay a $3.5 million civil penalty and make $12 million in restitution to about 66,000 customers.
The Consumer Financial Protection Bureau found that USAA failed to honor customers’ stop-payment requests on electronic transfers and had reopened customers’ previously closed deposit accounts with their authorization. As a result, some account balances became negative and potentially subject to various fees — including overdraft charges.
The consent order addressed certain USAA practices from 2011 to 2016. Eiess’ lawsuit stems from her attempt to pay her Citibank credit card bill last fall.
USAA rejected payment of the transaction because of insufficient funds and charged Eiess a $29 fee Oct 30.
Three days later, the same transaction was submitted for payment again — presumably by Eiess’ credit card company. USAA again rejected it because of insufficient funds and levied another $29 NSF charge, according to her lawsuit.
The same thing happened again Nov. 7.
“Again, USAA expressly referred to this transaction on (her) bank statements as a ‘RETRY PAYMENT,’ indicating even USAA understood this transaction to be another iteration of the same authorization for payment,” the lawsuit added.
Eiess never took action to resubmit the transaction, according to her lawsuit.
“There is zero indication anywhere in the account documents that the same ‘item,’ ‘check’ or ‘other withdrawal’ is eligible to incur multiple NSF or (overdraft) fees,” the lawsuit stated. “Instead, the Fee Schedule plainly states that only a single $29 NSF fee will be assessed per item.”
The lawsuit added that other banks that engage in “this abusive practice” disclose it to account holders.
In its motion to compel arbitration, USAA argued that the parties selected Texas law to govern the agreement because it’s the bank’s home state.
Chen found that Eiess failed to identify a fundamental policy of California law that would be violated if Texas law were to apply to her breach of contract and unjust enrichment claims. So she must arbitrate those claims.
Chen also ruled to stay the litigation before him pending the conclusion of the arbitration.
In a May court filing, USAA said that in the event the court does not compel arbitration, the bank would make a request to transfer the case to federal court in San Antonio.
Patrick Danner is a San Antonio-based staff writer covering banking and civil courts. Read him on our free site, mySA.com, and on our subscriber site, ExpressNews.com. | [email protected] | Twitter: @AlamoPD