Navy Federal to Resolve $1.7M Class Action Lawsuit Regarding EFTA Dispute

The $190 billion Navy Federal Credit Union based in Vienna, Virginia, recently reached a settlement agreement to pay $1.7 million in a class-action lawsuit. The lawsuit, initially filed in October 2023 by Jeffrey Stephenson and his son Billy Smith II, alleged that Navy Federal had wrongfully denied a fraud claim after Smith’s debit card was stolen. The claim was supported by documentation showing nearly $1,000 in unauthorized charges. Despite Stephenson’s repeated requests for clarification or a review of the evidence, Navy Federal consistently rejected the claims without providing any factual findings or documentation from an investigation.

The lawsuit claimed that Navy Federal’s denials violated provisions of the Electronic Fund Transfer Act (EFTA) and Regulation E, which mandate that financial institutions adhere to specific error-resolution procedures and limit consumer liability for unauthorized transactions. In response to the allegations, Navy Federal denied failing to provide explanations or meet the burden of proof to demonstrate that the disputed charges were authorized.

As part of the proposed settlement agreement, Navy Federal committed to revising its written explanations sent to members whose claims are denied and enhancing its procedures for addressing member requests for related documents. Although the credit union did not admit any wrongdoing, it agreed to settle the lawsuit due to the risks, uncertainties, and burdens associated with ongoing litigation.

Under the terms of the settlement, Stephenson and Smith will each receive $5,000 for actual damages, along with an additional $5,000 service award for serving as class-action representatives. The attorneys representing the plaintiffs will receive 33% of the settlement amount, which totals about $561,000. The remaining approximately $1.1 million will be distributed on a pro rata basis to current and former Navy Federal members who submit a valid and timely claim form. While the settlement does not specify the exact number of eligible members, those who qualify will have the opportunity to file for compensation.

In conclusion, Navy Federal’s settlement agreement in the class-action lawsuit signifies a commitment to implementing changes in its policies and procedures concerning account-holders’ claims for unauthorized transfers. The revised procedures aim to align with the requirements of the EFTA and Regulation E, highlighting the credit union’s dedication to upholding consumer protection laws and enhancing accountability in handling members’ claims.