Action Items

  • Review your customer agreements and ensure that they contain an arbitration provision and a class action waiver provision.
  • Require any vendors and/or FinTech partners that have direct agreements with bank customers to have an arbitration provision and a class action waiver provision.
  • Review your loan documents and ensure that they contain a jury waiver provision and a class action waiver provision.
  • Review your overdraft program to ensure that overdraft fees are charged per best practices.
  • Review your customer disclosures to ensure that your overdraft fees are charged as disclosed.

We have seen a recent uptick in class action lawsuits being filed against banks regarding overdraft fees charged on consumer deposit accounts and Paycheck Protection Program (“PPP”) loans. Additionally, as loan defaults increase because of the current pandemic, banks are enforcing their rights through litigation. As such, we anticipate that borrowers will try to use a class action as a defensive tactic and use other methods to obtain a trial by jury. Accordingly, it is critical that banks review their customer and vendor agreements to ensure that they have class action waiver provisions and arbitration and jury waiver provisions where appropriate.

Overdraft Class Action Litigation

We continue to be involved in class action litigation regarding overdraft fees on consumer deposit accounts. We have reviewed nearly identical demand letters and complaints, often drafted and filed by the same law firm. These lawsuits have been filed in state and federal courts around the country. The plaintiffs’ main arguments in such cases are that:

  • The defendant banks unlawfully reorder check and other debit transactions from highest to lowest dollar amount to maximize the number of overdraft and NSF fees charged to their customers.
  • The defendant banks misrepresent or fail to disclose their “high-to-low” overdraft fee policies to their customers.

The plaintiffs in these cases typically assert a variety of claims and seek compensatory, statutory, and punitive damages, as well as injunctive relief. Because these lawsuits are always brought as class actions and because the courts have been amenable to certain theories advanced by plaintiffs, the potential liability for targeted banks can be substantial.

Well-drafted mandatory arbitration and class action provisions can help mitigate your bank’s risk that it will be dragged into an expensive and time-consuming class action lawsuit.

PPP Class Actions

There have been several PPP loan related class action lawsuits. As banks are now submitting borrower PPP loan forgiveness applications, your bank should consider (if it has not already done so), requiring that a borrower agree to waive the right to participate in a collective or a class action and to mandatory arbitration as a condition before submitting a loan forgiveness application.

Vendor & FinTech Agreements

If your bank has any vendors or FinTech partners that have agreements with bank customers, you should require that in any agreements between the bank and the vendor and/or FinTech, that the vendor or FinTech have mandatory arbitration and class action waiver provisions with the end user. The reason is that although the bank may not have privity of contract with the end user, it does not prevent the end user from naming the bank in a lawsuit.

We Can Help You

Please contact us if you have received a demand letter, have been served with a class action lawsuit, or are reviewing your customer and vendor agreements. We can help you respond to any demand letter or lawsuit, and assist with any customer or vendor agreement “best practices” review.

COVID-19 Resources

We recommend reviewing the following pandemic-related business and legal considerations we have been discussing with our clients:

Jump to Page

We use cookies on our website to improve functionality and performance, analyze website traffic, and enable social media features. By continuing to use our website, you agree to our use of cookies.