New “failure to warn” theory alleges bank must tell customers they can avoid fees using other payment methods.
Account disclosures and fee schedules have been class action fodder for years. Recent claims have focused on overdraft and nonsufficient funds fees. Some have targeted fees that customers may incur as a result of delayed settlement of ACH transactions (so-called “Authorize Positive, Purportedly Settle Negative” or APPSN transactions). Others have complained about incurring multiple overdraft and nonsufficient funds fees when depositors issue payments and the payees present the item for payments multiple times (“same item, one fee” theory).
Now a new theory is being tested involving wire and ACH transfer fees. But unlike earlier fee-related cases, this one does not allege that the financial institution failed to disclose the fee or even when or how it would be incurred. Instead, it alleges that banks should disclose better or cheaper options for transferring funds.
The putative class action case appears to be the first of its kind. The bank’s online banking agreement tells customers they “may send and receive” ACH transfers, and may move money to another bank “for a fee.” For outbound transfers—when a customer sends money through the automated clearing house to an account held at another institution—the bank charges a fee of up to $10. There is no fee for inbound transfers.
That schedule is deceptive, plaintiffs allege, because it implies that fees are unavoidable when moving money electronically. “Accountholders can initiate the same ACH transfer from [the bank] to other financial institutions without a transfer fee provided they do so from the receiving financial institution.” Electronic payment mechanics are allegedly too complex for customers, who don’t realize they can avoid a fee using other means, allowing the bank to leverage its “superior knowledge about the system to extract fee income from its accountholders.” The lawsuit seeks restitution, punitive damages, and attorneys’ fees.
The bank has moved to dismiss the lawsuit. Pending a decision on that motion, attorneys are recruiting account holders to bring similar claims against other institutions. If the Court allows Bruin to move forward, a flurry of copycat lawsuits will likely follow. And while the merits of the case are untested, you may want to review your institution’s disclosures to evaluate whether there are other or additional disclosures you might give to circumvent this kind of “failure to warn” claim.
Miller Nash is monitoring this case and others affecting financial institutions nationwide. We will publish updates when they are available.