Trustco counters ‘sham’ suit
Bank goes after woman challenging overdraft charges
Contending that it’s facing a baseless allegation aimed at tarnishing its reputation, Trustco Bank on Tuesday filed a countersuit in federal court against a Florida woman who in September sued the bank over overdraft charges she had to pay when expenditures on her debit card exceeded the amount she had in her account.
Such countersuits are unusual, according to people familiar with these legal strategies.
Instead, large institutions like banks or corporations often settle with plaintiffs, even if they think their opponents have a weak case, in order to resolve the issue quickly.
“Many companies settle even the most frivolous claims to avoid the cost of defending a case. The problem is, settling bad claims is like feeding stray cats. If you feed one, pretty soon you have more. It is entirely lawyer-driven,” said Tom Stebbins, executive director of the Lawsuit Reform Alliance of New York, which believes too many baseless suits are filed each year.
Moreover, observers say there has been a recent spate of class action lawsuits against banks and credit unions challenging the overdraft fees.
The National Association of Federally Insured Credit Unions, for example, says such suits have been launched in 18 states over the last two years. Plaintiffs are often found through internet websites or social media campaigns. A newsletter from the Baker Donelson law firm also describes the increase in such suits.
In this case, Trustco says it is fighting back.
“Trustco brought the countersuit seeking to hold the plain
tiff accountable for bringing a baseless suit alleging that Trustco charged improper overdraft fees,” bank spokesman Robert Leonard said in a prepared statement.
“Trustco’s Home-town-bank reputation means everything and we can’t allow false claims to go unanswered.”
The case started in September when Celebration, Florida, resident Deborah J. Livingston sued the bank over $36 overdraft fees she was charged when, using her debit card, she spent more than she had.
Trustco also has branches in the Sunshine State.
The complaint, filed in U.S. Northern District Court, alleges that Trustco deceptively charges the fees after the fact. That is, if a customer makes a purchase with her debit card but has inadequate funds, she may not be charged for several days until the expenditure is fully cleared — or when her payment is reconciled with the merchant where she spent the money and the bank.
“By Defendant’s own calculations there was enough available money in the checking account to cover the transaction at issue when authorized and the money was specifically sequestered for that transaction but would be assessed an overdraft fee anyway,” reads part of the complaint.
Livingston’s attorneys are seeking class action status, and they want unspecified monetary damages.
The suit also notes that overdraft fees have long been criticized as an onerous expense faced by poor people who may have little money their accounts.
“The high cost of an overdraft fee is also usually unfairly punitive. In a 2012 study, more than 90 percent of customers who were assessed overdraft fees overdrew their account by mistake,” states the complaint, which references a Pew Charitable Trust study on overdraft charges.
Those criticisms don’t contend that the fees are illegal however.
Trustco’s countersuit, though, alleges that Livingston is making a “sham” argument and that “Plaintiff ’s statement that Trustco charged overdraft fees for debit card transactions is false and/or was made with reckless disregard for the truth.”
Livingston, for example, didn’t disclose that she also had an auto-pay feature that also takes out funds for items like recurring monthly bills such as mortgages or insurance.
“Plaintiff, in addition to using a debit card for her account, set up and authorized a number of automatic payments using Trustco’s online bill payment service,” reads the countersuit.
That could have led to overdrafts.
And Trustco says they notified Livingston when she had overdrawn her account.
“Notices of Insufficient Funds were sent to, and, upon information and belief, received by Plaintiff relative to each overdraft fee,” reads Trustco’s complaint.
Moreover, Trustco says Livingston could have signed up for an overdraft protection service the bank offers that could have prevented some of the problems.
Trustco in its suit is seeking unspecified compensatory damages and attorney fees.
The bank is represented by John Bailey of Bailey, Johnson and Peck in Albany.
He declined comment other than saying that he stands behind the allegations in the countersuit.
Livingston’s lead attorney is Syracuse lawyer John Cherundolo. He didn’t return a call for comment.
Also involved in the suit is New Jersey lawyer Kevin Roddy, who declined comment, and Los Angeles attorney Taras Kick, who didn’t return a call.