BY CINDY WILLIAMS
More rules may not be all your credit union has to contend with when it comes to 2016’s overdraft practices. The potential for lawsuits is very real as well, and no CU is safe. Find out how your credit union can avoid overdraft-related legal action in the months ahead.
Having studied overdraft practices for some time, the CFPB appears ready to act in 2016. While many in the movement are rightly concerned about the prospect of more rules, the burden may be even more encompassing. That’s because litigators have been known to charge ahead with or without regulator guidance.
Overdraft-based lawsuits aplenty demonstrate how regulator curiosity is often enough to propel litigation. It didn’t take long following the CFPB’s public disclosure of its interest in overdrafts for parties to begin filing suits. The lawsuits started with big bank defendants but have since spread to credit unions – evidence that no financial institution is safe from legal action.
In some cases, the questionable overdraft practices alleged in these suits appear to be intentional. Others, however, can be traced back to inadvertent back-office software settings.
Today, overdraft fees are both legal and acceptable to many consumers. However, regulators suspect the unsavory practices of some require their attention.So what kinds of practices are regulators investigating (and litigators exploiting)? And most importantly, how can your credit union stay out of the cross hairs of each one?