USAA Federal Savings Bank has reached a $64 million settlement after being accused of violating federal protections for military members. This settlement follows a three-year legal battle where USAA faced allegations of charging unnecessary fees and failing to comply with military lending laws. The settlement will benefit around 210,000 military customers and their attorneys.
The Settlement Agreement
Three years ago, five military members filed a lawsuit against USAA Federal Savings Bank, accusing it of charging unnecessary fees and violating federal protections for military members. Now, USAA settles $64 million lawsuit to resolve these accusations. This amount will be distributed among 210,000 military customers and the attorneys representing them.
The four main plaintiffs – Philip Bulls, Dean Brink, Carmin Nowlin, Nicholas Prado, and Raphael Riley – will each receive $20,000. The attorneys, from Zaytoun, Ballew & Taylor in North Carolina and Smith & Lowney in Washington, may receive up to 27.5% of the settlement, which is about $17.7 million.
USAA’s Stance
Despite agreeing to the settlement, USAA continues to deny any wrongdoing. The bank maintains that it has always aimed to exceed the minimum requirements set by federal laws protecting military servicemembers. USAA points to its lower interest rates as evidence of its commitment to serving military members.
USAA Public Relations Director Roger Wildermuth stated, “Before this lawsuit was filed, we had already compensated members for errors that may have occurred related to the allegations in the lawsuit. Roughly half of the announced settlement amount is simply reissuing checks we had previously mailed that our members never cashed.” Wildermuth emphasized that USAA settles $64 million lawsuit in the best interest of USAA’s members, allowing the bank to avoid a lengthy and expensive legal battle.
Background of the Lawsuit
In 2021, the plaintiffs filed a lawsuit against USAA, claiming that the checks sent out in response to previous federal orders were insufficient. These orders, issued by the United States Department of Treasury and the Office of the Comptroller of the Currency in 2019 and 2020, required USAA to mail checks to military servicemembers for violations of the Military Lending Act (MLA) and the Servicemembers Civil Relief Act (SCRA).
USAA mailed approximately 150,000 checks for SCRA violations, 109,000 checks for MLA violations, and another 600,000 checks related to debt protection and extended vehicle protection services. However, the plaintiffs argued that these checks did not adequately cover their financial losses and lacked proper documentation.
The Mediation Process
The path to the $64 million settlement was not straightforward. Mediation efforts began in February 2022 but faced numerous setbacks. The first mediation session, scheduled for June 2022, was canceled due to disagreements over required documents. Mediation efforts resumed in June 2023 with retired district court judge Elizabeth Laporte acting as mediator, but negotiations stalled again.
Finally, in January 2024, retired federal district court judge Layn Phillips, who had experience mediating similar cases, helped the parties reach an agreement. The final settlement was agreed upon on July 2, 2024, when USAA settles $64 million lawsuit.
Conclusion
The $64 million settlement marks the end of a long legal battle between USAA and its military customers. While USAA continues to deny the allegations, the settlement allows the bank to move forward and focus on providing exceptional service to its members. This case highlights the importance of compliance with federal protections for military members and the challenges of reaching a settlement in complex legal disputes.
FAQ’s
What is the USAA settlement about?
The USAA settlement involves a $64 million payout to resolve accusations that the bank violated federal protections for military members by charging unnecessary fees and failing to comply with laws like the Military Lending Act and the Servicemembers Civil Relief Act.
How many military members will benefit from the USAA settlement?
Approximately 210,000 military customers will benefit from the $64 million settlement, with some receiving compensation for previously issued checks that were never cashed.
Why did USAA agree to the settlement?
USAA agreed to the $64 million settlement to avoid a lengthy and expensive legal battle, despite denying the allegations. The bank believes the settlement is in the best interest of its members and allows it to focus on providing exceptional service.