By Jonathan Stempel
(Reuters) - USAA, the financial services company serving military personnel and their families, will pay $62.4 million to resolve a lawsuit claiming it overcharged service members and veterans on interest rates and fees.
A preliminary settlement of the proposed class action was filed on Friday night in the federal court in Elizabeth City, North Carolina, and requires approval by U.S. District Judge Terrence Boyle. USAA denied wrongdoing.
The lawsuit covers tens of thousands of service members with credit card and other loans at USAA Savings Bank and USAA Federal Savings Bank in various periods since May 4, 2009.
They accused USAA of violating the federal Servicemembers Civil Relief Act, Military Lending Act and Truth in Lending Act by failing to cap interest rates at 6% during active duty and permanently forgive interest above 6%.
Service members said they didn't discover the errors until 2021 when USAA sent "misleading" correspondence and courtesy checks that understated the refunds they were owed.
They also said they weren't fully compensated by 859,000 checks that USAA sent out after reaching consent orders in 2019 and 2020 with the Office of the Comptroller of the Currency addressing other violations.
Boyle approved similar settlements of $41.9 million with Bank of America and $62.5 million with JPMorgan Chase (NYSE:JPM) in 2018 and 2020, respectively.
In a statement, San Antonio, Texas-based USAA said it strongly disagreed with the accusations, but the settlement lets it avoid lengthy and expensive litigation.
It also said it charges lower interest rates than the law requires, and that about half the settlement is to reissue checks that members never cashed.
The plaintiffs' lawyers may seek up to 27.5%, or $17.7 million, from the settlement for fees and expenses.
Founded in 1922, USAA has about 13.5 million members and recently ranked 103rd in Fortune magazine's list of the 500 largest U.S. companies by revenue.
The case is Bulls et al v USAA Federal Savings Bank et al, U.S. District Court, Eastern District of North Carolina, No. 21-00488.