Pinkston-Poling v. Advia Credit Union

• Decision Date: 29 December 2016
• Docket Number: Case No. 1:15–CV–1208
• Citation: 227 F.Supp.3d 848
• Parties: Becky PINKSTON–POLING, individually and on behalf of all others similarly situated, Plaintiff, v. ADVIA CREDIT UNION, Defendant.
• Court: U.S. District Court — Western District of Michigan

227 F.Supp.3d 848

Becky PINKSTON–POLING, individually and on behalf of all others similarly situated, Plaintiff,

v.ADVIA CREDIT UNION, Defendant.

Case No. 1:15–CV–1208

United States District Court, W.D. Michigan, Southern Division.

Signed December 29, 2016

Philip J. Goodman, Philip J. Goodman, P.C., Eric B. Abramson, Michael B. Serling, P.C., Birmingham, MI, Richard Dale McCune, Jr., McCune Wright LLP, Ontario, CA, Taras Kick, The Kick Law Firm, Santa Monica, CA, for Plaintiff.

Brandon John Wilson, Howard & Howard Attorneys PLLC, Royal Oak, MI, for Defendant.

OPINION

GORDON J. QUIST, UNITED STATES DISTRICT JUDGE

Plaintiff, Becky Pinkston–Poling, has filed an amended class-action complaint against Defendant, Advia Credit Union (Advia), alleging claims of breach of contract and violation of the Electronic Fund Transfer Act (EFTA), 15 U.S.C. §§ 1693, et seq. Both claims are based on Pinkston–Poling's allegation that Advia applies its overdraft fee program in a different manner than Advia describes in its agreements with, and disclosures to, its members. That is, Pinkston–Poling alleges that Advia charges overdraft fees based on the so-called "available balance" in a member's account rather than the "actual" or "ledger" balance, as Advia's written agreements state, resulting in overdraft fees even when sufficient funds are in the account to pay the item.

Advia has filed a motion pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Pinkston–Poling's amended complaint for failure to state a claim. The Court heard oral argument on the motion on October 7, 2016. Following the hearing, the Court ordered the parties to file additional briefs on the issues of whether the safe harbor provision of the EFTA, 15 U.S.C. § 1693m(d)(2), bars Pinkston–Poling's EFTA claim and, if so, why this Court has jurisdiction under the Class Action Fairness Act of 2005 (CAFA). (ECF No. 34.) The parties have filed their supplemental briefs, and the matter is ready for decision.

For the following reasons, the Court will deny Advia's motion.

I. FACTS

The following facts are taken from Pinkston–Poling's amended complaint.

Advia is a Michigan-based credit union with branches throughout Michigan, Wisconsin, and Illinois. (ECF No. 11 at PageID.162.) Pinkston–Poling was a member of Advia and had a checking account that included a debit card that she could use to withdraw funds from ATM machines, pay for point-of-sale purchases, and perform other financial transactions. (Id . at PageID.161, 166.)

Pinkston–Poling alleges that Advia's overdraft program, known as Courtesy Pay, is different than what Advia describes in its Member Account Agreement & Truth in Savings Disclosure (Member Account Agreement), different than what Advia represents to its members, and not what its members expect based on Advia's representations. (Id. at PageID.164.) In particular, Pinkston–Poling alleges, Advia says that it will charge an overdraft fee only when the member's actual/ledger account balance—the amount of money in the account without any reduction for anticipated future debits—is not sufficient to pay the item. (Id. ) Pinkston–Poling also alleges that Advia's separate agreement required by Regulation E of the EFTA for ATM withdrawals and one-time debit transactions (Opt-in Agreement) similarly provides that an overdraft occurs when the member's actual/ledger account balance is insufficient to cover a transaction. (Id. at PageID.165, 192.) Pinkston–Poling alleges that, in contrast to the provisions in the Member Account Agreement and the Opt-in Agreement, which require Advia to use the actual/ledger balance in determining whether there is an overdraft, Advia uses the available balance—an artificial internal calculation that subtracts anticipated future debits from the actual balance—which allows Advia to charge overdraft fees even when the member has sufficient funds in her account to pay the item. (Id. at PageID.165.)

Pinkston–Poling alleges that Advia's use of the available balance to assess overdraft fees breaches both the Member Account Agreement and the Opt-in Agreement and violates the EFTA because the Opt-in Agreement fails to accurately describe Advia's overdraft program for ATM and non-recurring debit card transactions. Pinkston–Poling claims that she was harmed by this practice on June 27, 2015, when she had an actual balance of $30.48 in her account before a $7.00 debit card transaction was posted, leaving her with an actual balance of $23.48. However, Advia charged Pinkston–Poling an overdraft fee of $32.00 for this $7.00 transaction. (Id. at PageID.166.)

II. DISCUSSION

A. Applicability of 15 U.S.C. § 1693(D)(2)

Initially, the Court addresses whether the safe harbor provision, 15 U.S.C. § 1693m(d)(2), applies in this case because in its October 7, 2016, Order to Show Cause, the Court indicated that if the safe harbor provision precludes Pinkston–Poling's EFTA claim, the Court may lack jurisdiction under CAFA. Having read the parties' briefs in response to the Order to Show Cause, the Court concludes that the safe harbor provision does not bar Pinkston–Poling's EFTA claim and, therefore, the Court has subject matter jurisdiction.

In considering whether the safe harbor provision applies in the instant case, the Court must bear in mind that the EFTA is a remedial statute designed to protect consumers and, therefore, must be given " ‘a broad, liberal construction in favor of the consumer.’ " Clemmer v. Key Bank Nat'l Ass'n , 539 F.3d 349, 353 (6th Cir. 2008) (quoting Begala v. PNC Bank, Ohio, Nat'l Ass'n , 163 F.3d 948, 950 (6th Cir. 1998) ). In addition, "exclusions or exceptions should be construed narrowly." In re Carter , 553 F.3d 979, 985 (6th Cir. 2009) (internal quotation marks omitted).

Pinkston–Poling alleges that Advia violated the EFTA by failing to comply with Regulation E's Opt-in Rule governing overdraft fees for ATM and one-time debit card transactions, 12 C.F.R. § 1005.17. In particular, the regulation states:

(1) General. Except as provided under paragraph (c) of this section, a financial institution holding a consumer's account shall not assess a fee or charge on a consumer's account for paying an ATM or one-time debit card transaction pursuant to the institution's overdraft service, unless the institution:

(I) Provides the consumer with a notice in writing, or if the consumer agrees, electronically, segregated from all other information, describing the institution's overdraft service ....

12 C.F.R. § 1005.17(b)(1)(I) (italics added). The content and format provision states that the required notice "shall be substantially similar to Model Form A–9 set forth in appendix A of this part, [and] include all applicable items in this paragraph ... [including] [a] brief description of the financial institution's overdraft service...." 12 C.F.R. § 1005.17(d)(1). The safe harbor provision provides, in pertinent part: "No provision of this section or section 916 imposing any liability shall apply to ... (2) any failure to make disclosure in proper form if a financial institution utilized an appropriate model clause issued by the Board." 15 U.S.C. § 1693m(d)(2) (italics added).¹

As set forth in the October 7, 2016 Order, the only issue is whether Advia's Opt-in Agreement—which the parties agree is substantially similar to Model Form A–9—triggers application of the safe harbor provision. Advia argues that the safe harbor provision applies because the content and format subsection of Regulation E requires financial institutions to provide a notice "substantially similar to Model Form A–9" and prohibits the inclusion of information not specified in 12 C.F.R. § 1005.17(d), and it is undisputed that Advia's Opt-in Agreement was substantially similar to Model Form A–9. Pinkston–Poling argues that the safe harbor provision does not apply because she is not alleging that Advia failed to make a disclosure or a proper disclosure, but instead that Advia failed to accurately describe its overdraft service as required by Regulation E. Pinkston–Poling further argues that, even if liability in this case is based on failure to make a disclosure, her claim is based on the inadequacy of the content, not the form, of Advia's Opt-in Agreement. Finally, Pinkston–Poling argues that, in any event, Model Form A–9 is not "an appropriate" form because it does not accurately describe Advia's overdraft service, which is based on the available balance method rather than the actual balance method.

Although the Court "tentatively" concluded in its Order that the safe harbor provision precludes Pinkston–Poling's EFTA claim, having further considered the issue in light of the parties' briefs, the Court now concludes that the safe harbor provision does not apply because Pinkston–Poling is not alleging that Advia failed to make a disclosure or to disclose something in proper form. Instead, she alleges that Advia "fail[ed] to truthfully and accurately describe ... the conditions under which an overdraft fee will be assessed." (ECF No. 11 at PageID.173.) As noted, Regulation E precludes a financial institution from charging an overdraft fee on an ATM or one-time debit card transaction unless it provides the consumer "a notice ... describing the institution's overdraft service." 12 C.F.R. § 1005.17(b)(1)(I). Although the notice must be "substantially similar to Model Form A–9," 12 C.F.R. § 1005.17(d), it must describe "the financial institution's overdraft service." 12 C.F.R. § 1005.17(d)(1) (italics added). In its "Official Interpretations" of Regulation E at 12 C.F.R. pt. 1005 Supp. 1, the Consumer Protection Financial Bureau (CPFB) discusses the use of model forms and clauses. It states that "[i]f an institution uses these clauses accurately to reflect its service , the institution is protected from liability for failure to make disclosures in proper form."² (Italics added). Assuming that the safe harbor provision's reference to "model clause" should also be construed to cover use of a ...