Risk alert warns credit unions about litigation involving foreign transaction fees

In a risk alert issued Wednesday, CUNA Mutual Group reported that class action litigation is being pursued against some credit unions involving foreign transaction fees being assessed on debit cards.

The complaints allege that certain credit union disclosures are misleading by stating that foreign transaction fees will be assessed when the transactions are “made” in foreign countries, however, in certain situations, the member who made the transaction may have actually been located in the United States, and the merchant located in a foreign country at the time.

CUNA Mutual Group has provided credit unions with the following mitigation tips to consider:

Remove your credit union’s member account agreement and disclosures from your public-facing website.

  • Include a binding arbitration clause with a class action waiver to the member account agreement. Such language can be used to prevent these situations from becoming class action lawsuits. Work with legal counsel to develop this language so it does not impair your ability to initiate collection activity of amounts owed to the credit union through the court system.
  • If your credit union assesses foreign transaction fees on credit and/or debit cards, you should work with legal counsel or your forms supplier to ensure your disclosures (e.g., EFT disclosure, credit and debit card disclosure and fee schedule) clearly outline when foreign transaction fees will be assessed.
  • LOANLINER customers should be on the lookout for additional communications and follow the specific action steps provided.

If a lawsuit is filed against your credit union, or you receive a demand letter threatening a lawsuit, policyholders should immediately report it to CUNA Mutual Group. Claims can be submitted online or via email at litigation.team@cunamutual.com.

CUNA Mutual Group’s risk alerts may be accessed on their Protection Resource Center. Log-in is required.

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