Banks and banking – Overdraft fees

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Where a plaintiff has filed a complaint concerning checking account overdraft fees charged by the defendant bank, the bank’s motion to dismiss the complaint should be denied because there are multiple ambiguous terms in the operative documents relevant to the bank’s overdraft policy.

“Jennifer Juliano brings this case as a class action to challenge certain policies of Avidia Bank (‘Avidia’) in regard to its checking account overdraft fees. …

“Plaintiff has a checking account with Avidia. She opted into Avidia’s standard overdraft practices. Plaintiff’s checking account is governed by Avidia’s Deposit Account Agreement and related documents (‘Account Documents’), which are forms drafted by Avidia that Avidia imposes on all of its deposit account customers. The Account Documents include a Deposit Account Agreement, an Overdraft Protection Opt-In Form, an Electronic Fund Transfer Disclosure Agreement, a Funds Availability Policy Disclosure, a Truth-in-Savings Disclosure,and a Privacy Disclosure. Other than the Privacy Disclosure, each of these forms speaks in different terms about Avidia’s policy to assess overdraft fees. …

“According to plaintiff, with respect to both check deposits and debit card transactions, Avidia assesses overdraft fees on transactions that do not actually overdraw a customer’s account. …

“Plaintiff filed this case for herself and others similarly situated. Her Amended Complaint asserts two counts: breach of contract, including the implied covenant of good faith and fair dealing; and unfair or deceptive trade practices in violation of G.L.c. 93A, sectionsection2, 9.

“Avidia now moves to dismiss both counts under Mass. R. Civ. P. 12(b)(6). Avidia argues that it charged overdraft fees to plaintiff in accordance with the plain terms of the Account Documents; that plaintiff expressly opted into a program to receive flexibility in making purchases even if her available balance was insufficient; and that plaintiff has, at most, pled a breach of contract, but has not alleged sufficient facts to support a claim under G.L.c. 93A. …

“Plaintiff alleges that Avidia has failed to define several of the key contract terms relevant to the assessment of overdraft fees. …

“Avidia is correct in asserting that the availability of funds from a check is set out in the Funds Availability Policy Disclosure. However, ‘overdraft’ is not expressly defined by reference to a customer’s ‘available balance,’ but rather by whether the customer has ‘enough money in [the customer’s] account to cover the transaction.’ Where the Funds Availability Policy Disclosure suggests that money is held in a customer’s account until it is available, the definition of ‘overdraft,’ which looks to whether the customer has enough money in her account, creates ambiguity as to whether Avidia will assess an overdraft fee by reference to ‘available balance,’ or what the parties and caselaw refer to as the customer’s ‘actual balance’ or ‘ledger balance.’

“With regard to debit transaction processing, the Electronic Funds Transfer Agreement does not clearly state when the amount of the debit transaction will be debited from the account. The Electronic Funds Transfer Agreement strongly suggests that debit card transactions will be subject to overdraft consideration at the time the debit card is used. Given how plaintiff has alleged debit cards are used in ordinary commerce, a consumer could reasonably believe that funds are immediately withdrawn —and subject to overdraft considerations —when a debit card is used. As the Second Circuit found in Roberts [v. Capital One, N.A., 719 F. App’x. 33 (2d Cir. 2017)], given that there are multiple ambiguous terms in the operative documents relevant to Avidia’s overdraft policy, the factual allegations of the Amended Complaint plausibly suggest an entitlement to relief that precludes dismissal.

“In addition, Count 1 also has stated a claim for breach of the implied covenant of good faith and fair dealing. … Where, as here, a party ‘could have reasonably expected that the overdraft fees would be assessed based on the “actual balance”, rather than “available balance”, … [plaintiff] stated a plausible claim for breach of the implied covenant of good faith and fair dealing.’… Defendant’s motion to dismiss the plaintiff’s contract claim must be denied. …

“… While a simple breach of contract alone is not sufficient to constitute a 93A violation, … a breach of the implied covenant of good faith and fair dealing may establish conduct that is unfair and deceptive. … At this early stage, plaintiff’s allegations are sufficient to state a claim for violation of G.L.c. 93A.”

Juliano v. Avidia Bank (Lawyers Weekly No. 09-008-22) (10 pages) (Krupp, J.) (Suffolk Superior Court) (Civil No. 20-1861-BLS1) (Feb. 1, 2022).

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