Overdraft Confusion Continues

June 4, 2019 at 9:05 am 1 comment

It’s not like litigation over overdrafts is new. Nevertheless, litigators, banks and credit unions continue to play a game of legal chicken when it comes to debating just what account agreements mean.

The latest example of this confusion comes courtesy of Navy Federal Credit Union which decided to settle a class action lawsuit brought against them in California alleging that it violated its account agreement. An issue in this case was the following language explaining that “an overdraft occurs when you do not have enough money in your account to cover a transaction but we pay it anyway.”

What’s so confusing about that? Well, in an earlier decision decided by the Court of Appeals for the 2nd Circuit which has jurisdiction over New York – Roberts v. CapitalOne, N.A. 719 Fed. App. !x33 2017 – the court held that plaintiffs could bring a claim for breach of contract as well as deceptive practices under New York law because the language is reasonably susceptible to two different interpretations. As the second circuit explained “it is equally reasonable to understand the term “Overdraft” as referring to Capital One’s election to make a payment, which would occur at the time of authorization (as asserted by Roberts), or as referring to the payment itself, which would occur at the time of settlement (as asserted by Capital One). Because this fundamental definition is “subject to more than one reasonable interpretation,” it is ambiguous.”

I’ve said it before and I’ll say it again there’s been enough legal guidance on this issue to avoid costly litigation or at least put your credit union in a darn good position to win it. Check your agreement if you haven’t done so already and see how it measures up against these and the other cases I have referred to periodically.

New York Not Going To Pot

In yet another example of why it’s a good thing I don’t bet for a living, it appears that New York will not be legalizing recreational marijuana before the end of this session. Although some of its proponents may disagree, Governor Cuomo explained yesterday that right now there are not enough votes in the Senate to get legalization through that Chamber this year. While I’m surprised you’re not going to see movement on it this year, if the Governor is correct, this is good news even if you want to see further legalization take place. It makes absolutely no sense for states to move on further legalization until the federal government gets its act together on this issue.

Entry filed under: Legal Watch, New York State. Tags: , , .

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1 Comment Add your own

  • 1. Sarah  |  June 4, 2019 at 10:57 am

    It seems to me that on the legalization question that the federal government may not move until they see more states making the move and creating some sort of “majority” of concent to change the federal policy. While it may seem contrary I believe that there is some historical precident for this process, but can’t remember the article that I read about it at the time.


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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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