In re TD Bank, N.A.
| Decision Date | 21 February 2018 |
| Docket Number | Civil Action No.: 6:15-MN-2613-BHH |
| Court | U.S. District Court — District of South Carolina |
| Parties | IN RE: TD BANK, N.A. DEBIT CARD OVERDRAFT FEE LITIGATION MDL No. 2613 |
ALL CASES
This matter is before the Court on Plaintiffs' motion for class certification (ECF No. 140-1). Defendant TD Bank, N.A. (hereinafter "Defendant," "TD," or "the Bank") filed a response in opposition (ECF No. 142), and Plaintiffs filed a reply in support (ECF No. 143-1). On May 24, 2017, the Court conducted a hearing on this issue and took the class certification motion under advisement. (See ECF No. 156.) The matter is ripe for consideration.
Plaintiffs maintain two overarching theories of liability. First, they allege the Bank has engaged in a regular practice of extracting overdraft fees from customers even when their accounts were not actually overdrawn (the "available balance theory"), to the tune of millions of dollars in improper fees. The gravamen of this claim pertains to TD's computerized processing system, which was programmed to deem accounts overdrawn if a transaction was greater than the balance of money in the account minus the amounts of approved debit card transactions, even before such transactions had been presented for payment and while the relevant funds were still in the account. This practice, Plaintiffs note, disproportionately impacts the Bank's most vulnerable customers—those whose available balance tends to approach zero or negative numbers on a recurring basis and who have the least ability to afford sometimes numerous $35 overdraft fees. According to Plaintiffs, this practice breached the Bank's own form contract (Count I), breached the implied covenant of good faith and fair dealing (Count II), amounted to conversion (Count IV), constituted unjust enrichment (Count V), and violated the unfair and deceptive trade practice statutes of several states (Count VI). (See Pls.' Mot. for Class Certification, ECF No. 140-1 at 13, 18-26.)
Second, Plaintiffs allege that TD has systematically violated federal law by failing to comply with mandatory opt-in requirements imposed by Regulation E (the "Reg E theory") prior to assessing overdraft fees on one-time debit card and automated teller machine ("ATM") transactions. The fallout of these regulatory infractions, Plaintiffs contend, has been widespread "opt-in" to the Bank's debit card overdraft program ("Debit Card Advance" or "DCA") without lawful notice, authorization, and confirmation of enrollment. Plaintiffs further assert that these opt-in practices have been standardized across large swaths of TD's customer base, making class treatment of this claim the only practicable option for the Court, the parties, and the putative class members. Although the same alleged deficiencies did not apply to every customer, Plaintiffs aver that each "channel" for customer opt-in—for example, in-branch or online opt-in—was flawed in the same manner. (See id. at 13-14, 26-39.)
Plaintiffs' central argument for class certification is that the Bank's uniform contracts and standardized, automated practices—including computer systems that assessed and collected overdraft fees from the proposed classes with uniform logic—were applied to the putative class members in the same manner as they were to the named Plaintiffs, making the case ideally suited for class treatment. Defendant's maincounter-argument is that individual questions will predominate over common questions with regard to all theories, all claims, and all defenses, and that the only way to properly treat the relevant issues would be through thousands, perhaps millions, of mini-trials, thus precluding class treatment across the board.
Defendant TD Bank, N.A. is a combination of several U.S. banks acquired by its Canada-based parent, Toronto-Dominion Bank, since 2004. The Bank maintains more than 1200 branches across the United States and has more than 8.5 million customers. (See Company Fact Sheet, ECF No. 140-27 at 2.)
During all times relevant to this case, the Bank's relationship with its checking account customers has been governed by a form contract called the Personal Deposit Account Agreement ("PDAA"). (See ECF Nos. 140-29 (June 2010 PDAA), 140-30 (Sept. 2011 PDAA), 140-31 (Feb. 2012 PDAA), 140-32 (June 2013 PDAA).) The relevant contractual terms are the same for all checking account customers, and all customer transactions have been and are processed in a uniform, automated manner by the Fidelity IMPACS processing system and TD's debit card management system, the FIS-EFT System (or "Metavante"). (See Tomlinson Dep. 10:16-12:9, ECF No. 140-10 at 5-7.) The Bank maintains archival reports dating back to the early 2000s detailing all customer account transactions that have been processed through its systems. (Id. at 12:20-24, 14:4-21.)
Beginning in February 2008, as part of a series of progressive changes to its overdraft fee practices called Project MORE ("Making Overdraft Revenue Easier"), theBank began to take into account all pending transactions, including pending credits, pending debits, and outstanding debit card authorizations, in determining the customer's available account balance to pay items presented for final settlement and payment. This change in available balance calculation practice was part of a phase of Project MORE called "Wave 6." (See id.) Prior to the implementation of Wave 6, pending transactions were not calculated in the customer's available account balance to pay items presented for final settlement and payment. After this change, if an item posted to an account with a negative available balance resulting from a pending transaction(s), an overdraft fee would be assessed. (ECF No. 140-34 at 18.) However, the Bank would not deduct pending transactions from a customer's available account balance for certain categories of merchants that routinely request authorization for amounts in excess of the likely settlement amount, including hotels and resorts, airlines and cruise lines, car rental companies, and automated gas pumps. (Id.)
The modifications made to the determination of customers' available balance pursuant to Wave 6 produced a significant increase in annual overdraft fee revenue for the Bank. (See Project MORE Update, ECF No. 140-35 at 2 ()); Chevalier III Dep. 82:17-83:18, ECF No. 140-8 at 22 ().) The Bank made no change to the PDAA when implementing Wave 6; however, the Bank communicatedthe relevant changes to its customers through various channels, to include paper mailings, an online landing page, an email to customers who utilize online banking, and a message alerting customers banking by phone. (Sacknoff I Dep. 41:20-42:23, ECF No. 140-11 at 12-13; Chevalier III Dep. 67:1-25, ECF No. 140-8 at 18.)
TD's overdraft policies, practices, and procedures were implemented uniformly across all branches and in each state where TD has a presence. The process of assessing an overdraft fee based on a customer's available balance generally includes the following steps in any particular instance:1 1. the customer initiates a debit card transaction at a merchant; 2. the merchant sends TD an electronic authorization request, typically through a third-party processor, which is received by the FIS-EFT System; 3. the FIS-EFT System automatically determines whether the transaction should be authorized based on the transaction information and the customer's account information; 4. the FIS-EFT System makes this determination based on account information provided by Fidelity IMPACS, TD's customer deposit account system of record, which updates customer account balances throughout the day and processes and posts day-to-day transaction activity during nightly batch; 5. in communicating the relevant account information, Fidelity IMPACS assesses the available balance at the time of the merchant's query, potentially available funds in any linked overdraft protection source (e.g., a savings account or line of credit), and the amount to which the particular account is permitted to go into overdraft (permission is based upon an algorithmic scoring matrix specific to theindividual account called "OD Points"2); 6. if sufficient funds are available based on the foregoing factors as determined by Fidelity IMPACS, the FIS-EFT System sends authorization back to the merchant (if sufficient funds are not available the transaction is declined and no overdraft fee results from the attempt); 7. once the transaction is authorized, the Bank places a "memo hold" on the customer's account in the amount of the authorization request and deducts the amount of the pending transaction from the customer's available balance; 8. the memo hold remains in place until the earlier of (a) receipt of final settlement information for the transaction or (b) three business days; 9. the Bank posts transactions to customers' accounts during the late night or early morning hours of each business day pursuant to the analysis and processing of batch files received from multiple sources (e.g., third-party processors, point of sale and ATM networks, other banks processing checks, entities submitting automated clearing house payments and requests, etc.) in the following order—(a) deposits and other credits that become available to the customer that business day are added to the customer's available balance, (b) subject to...
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