Thursday, May 22, 2014

Lawsuit Alleges CU Allowed Online Payday Lender Unauthorized Access to Bank Account

A lawsuit by James Dillon alleges that San Antonio-based Generations Federal Credit Union and three bank defendants allowed online payday lenders to initiate unauthorized debits of the plaintiff's checking account.

According to the complaint, the plaintiff obtained five payday loans over the internet from lenders based offshore or on Indian reservations, which carried interest rates ranging from 139 percent to over 700 percent and, in some cases, thousands of dollars in finance charges.

According to the plaintiff, these loans violated North Carolina’s usury statute and various other state laws.

The plaintiff alleges that the Originating Depository Financial Institutions (ODFIs) should have known that the lenders were engaged in making payday loans in states where the loans were unlawful and that they violated RICO by knowingly facilitating the collection of usurious loans through the ACH Network.

Beginning on paragraph 100 of the complaint are the allegations against Generations Federal Credit Union.

"On or about July 1, 2013, CashCall initiated a debit transaction in the amount of $313.96 from Plaintiff’s checking account in North Carolina through the ACH Network. The ODFI originating this transaction was Defendant Generations.

On or about August 2, 2013, and September 20, 2013, CashCall initiated debit transactions in the amount of $294.46 from Plaintiff’s checking account in North Carolina through the ACH Network. The ODFI originating these transactions were Defendant Generations.

CashCall has subsequently sold Plaintiff’s debt to another third-party collection company which continues to initiate unauthorized debits from Plaintiff’s checking account through ACH debit entries originated by Defendant Generations."

In April, a U.S. District Judge the denied the defendants' motion to dismiss the lawsuit.

Read the complaint.

Read the Judge's opinion and order.

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