USAA Settles Military Fee Lawsuit for $62.4 Million

USAA Settles Military Fee Lawsuit for $62.4 Million

Introduction

USAA, a financial services company serving military members and their families, has agreed to pay $62.4 million to settle a lawsuit accusing it of overcharging service members and veterans on interest rates and fees.

The settlement, filed in a federal court in Elizabeth City, North Carolina, requires approval from a U.S. District Judge. Despite the settlement, USAA denies any wrongdoing.

The lawsuit involves tens of thousands of service members with credit card and loan accounts at USAA Savings Bank and USAA Federal Savings Bank since May 4, 2009. The plaintiffs claimed that USAA violated the Servicemembers Civil Relief Act, Military Lending Act, and Truth in Lending Act by failing to cap interest rates at 6% during active duty and not permanently forgiving interest exceeding that rate.

According to the lawsuit, service members were unaware of the issue until 2021 when USAA sent "misleading" correspondence and courtesy checks that underreported the refunds they were owed. The lawsuit also contends that previous settlements, which led to USAA sending out 859,000 checks in response to consent orders with the Office of the Comptroller of the Currency in 2019 and 2020, did not fully compensate affected members.

In response, USAA stated that it disagrees with the allegations but opted to settle to avoid prolonged and costly litigation. The company also highlighted that it charges interest rates lower than legally required, and noted that part of the settlement will be used to reissue uncashed checks from the previous settlement.

The plaintiffs' attorneys may request up to 27.5% of the settlement, amounting to $17.7 million, for legal fees and expenses. USAA, founded in 1922, serves around 13.5 million members and was recently ranked 103rd on Fortune's list of the 500 largest U.S. companies.