by Washington DC – Flagstar Bank, formerly known as New York Community Bank (NYCB), has agreed to a $1.23 million class-action settlement addressing allegations that it imposed unfair ATM, non-sufficient funds (NSF), and overdraft fees on its customers. The settlement allows eligible bank account holders to receive compensation automatically, without having to prove they were impacted.
The case reflects growing scrutiny over bank fees, consumer rights, and accountability in the U.S. financial sector.
Allegations Against the Bank
Plaintiffs claimed that Flagstar Bank charged fees in ways that contradicted its stated policies, taking advantage of customers in specific transaction scenarios. The settlement covers two primary groups:
- Checking account holders between March 2, 2017, and January 1, 2020, who were charged NSF and overdraft fees on check or ACH (automated clearing house) payments.
- Customers charged more than one out-of-network ATM fee for withdrawals preceded by a balance inquiry between August 20, 2020, and February 20, 2024.
ACH payments refer to electronic money transfers between U.S. bank accounts.
Compensation Details
Under the settlement:
- Customers who paid retry NSF fees or overdraft fees on checks or ACH transactions will receive a proportional share of the fund based on the total fees they incurred.
- Customers charged multiple out-of-network ATM fees for withdrawals preceded by a balance inquiry will receive a flat payment of $25.
Payments will be issued either as a credit to the bank account or as a check, depending on whether the customer still holds an account with Flagstar Bank.
Automatic Distribution and Final Approval
Eligible class members do not need to submit proof of the fees they were charged. Compensation will be distributed automatically after the court grants final approval.
Those wishing to opt out of the settlement must do so by December 15, 2025. The final approval hearing is scheduled for January 13, 2026, after which payments will be distributed.
Understanding Class-Action Settlements
A class-action settlement resolves a lawsuit filed on behalf of a large group of people (“class”) who share similar claims against a company. Instead of pursuing individual lawsuits, a single case represents all affected parties.
When the defendant agrees to settle, money is placed in a settlement fund and distributed based on the criteria established by the court, such as fees paid or the impact experienced by each class member.
This settlement represents a significant win for consumers and sets a precedent for future banking accountability.
Have you ever been charged unexpected fees by your bank? How should financial institutions be held accountable for unfair practices?
Share your thoughts in the comments — your experiences and opinions can help raise awareness and promote fair banking practices.
