New York Federal Court Denies Motion to Dismiss Claims Alleging that Credit Union Improperly Charged Customers “Overdraft Fees” When Sufficient Funds Existed in Customer’s Account to Cover the Transaction

The United States District Court for the Northern District of New York recently denied a federal credit union’s motion to dismiss a class action complaint alleging that the credit union violated contract law, Regulation E of the Electronic Fund Transfer Act (15 U.S.C.A. §§ 1693 et seq.) (“Regulation E”), and Section 349 of New York General Business Law (“N.Y.G.B.L. § 349”) by charging its customers overdraft fees even when their accounts contained enough funds to cover the transactions.  See Story v. SEFCU, 2019 WL 2369878 (N.D.N.Y. 2019). The defendant, State Employees Federal Credit Union (“SEFCU”), offers its customers the option to “opt-into” an overdraft protection contract where SEFCU will cover certain transactions in excess of the available funds in a customer’s account for a standard $25 “overdraft fee.”  Plaintiff, a customer of SEFCU, claimed that she entered into the “opt-in” overdraft contract with SEFCU and was charged an overdraft fee of $25 when she made a $3.66 debit purchase from her account with a balance of $88.64. 

Plaintiff alleged that SEFCU improperly utilized an artificial balance calculation to determine whether enough funds exist in a customer’s account for a transaction which, in turn, may result in a customer being charged an overdraft fee even if the account contains sufficient funds.  Therefore, plaintiff claimed, SEFCU’s practice of charging overdraft fees was in violation of the “opt-in” contract with its customers and Regulation E, which requires, in pertinent part, a financial institution to: (1) provide the customer with a copy of the overdraft policy; (2) inform the customer of the options that he or she has to avoid overdraft fees, if such options exist; and (3) obtain “opt-in consent” for the overdraft policy.  The defendant moved to dismiss the complaint for lack of standing.

The Court denied the motion.  First, the Court found that plaintiff had properly alleged a breach of contract claim because SEFCU entered into the contract with plaintiff—stating it would only charge an overdraft fee if insufficient funds existed to cover the presented transaction—and nonetheless charged plaintiff an overdraft fee.  The Court rejected the defendant’s claims that the plaintiff never affirmatively “opted-into” the overdraft program and never suffered an injury from the overdraft charge, stating that SEFCU never provided any proof to dispute these claims. 

Second, plaintiff asserted a cause of action for unjust enrichment, claiming that plaintiff and class members have conferred a benefit on the defendant, the defendant has knowledge of this benefit, as well as the wrongful circumstances under which it was conveyed, and yet the defendant voluntarily accepted and retained the benefit conferred to the tune of “millions of dollars in overdraft fees.”  The Court found that, at this stage of the proceeding, plaintiff had standing to bring an unjust enrichment claim, even though the relief accorded for unjust enrichment is “only available in the absence of an enforceable written contract between the parties . . . .”

Third, plaintiff alleged that SEFCU did not properly abide by Regulation E’s opt-in requirements before charging overdraft fees.  The Court found that the defendant did not provide any evidence to adequately dispute this allegation; therefore plaintiff had properly alleged that she suffered an injury (overdraft fee of $25) traceable to SEFCU’s alleged violation of Regulation E.

Last, plaintiff alleged that SEFCU’s practice of charging overdraft fees even where the customer’s account contained enough funds to cover the transaction was a deceptive act in violation of N.Y.G.B.L. § 349.  The Court found that plaintiff had standing to bring this claim because she alleged that she was harmed by SEFCU’s unlawful business practice of improperly charging overdraft fees.

For a copy of the decision, please contact Michael O’Donnell at, Michael Crowley at, or Anthony Lombardo at