Lawsuits that accuse credit unions of predatory overdraft practices may seem as if they intend to protectconsumers, but at their core they are “just about playing thesystem,” CU*Answers CEO Randy Karnes told Credit Union Times.

Such lawsuits, like those filed June 22 against three largeCalifornia credit unions, do little to help those who overdrafttheir accounts, but are helpful to lawyers in search of paperworksettlements, said Karnes, whose Grand Rapids, Mich., CUSO servesabout 185 credit unions with core processing and a variety of otherservices.

Industry consultant Marvin Umholtz agreed, saying thatunfortunately, a credit union doesn't have to be guilty of abusivebehaviors to be subjected to lawyers' attempts to “shake down thefinancial community for settlements.”

The $9.4 billion SchoolsFirst Federal Credit Union, $6 billionStar One Credit Union and $1.3 billion Kern Schools Federal CreditUnion were all sued by the same attorney in three separatesuits.

The suit claims members were victims of transaction reorderingand other abusive overdraft practices. The court documentswere worded similarly to other overdraft lawsuits against bigbanks.

Opportunistic attorneys aside, Karnes said credit unions shouldbe mindful that times have changed, and what was once seen as amember-friendly tactic is now suspect. Every credit union should beaware of those who seek to exploit overdrafts, and work to validatetheir processing practices against today's network standards, hesaid.

“What was once helping a member clear their largest andpotentially most embarrassing NSF type transactions first, now issuspect by those who believe that the member has no responsibilityin actually spending only the money they have in their account,”Karnes said. “A sign of the times, and the unfortunate rule of theday.”