Class Action to Proceed Against Credit Card Firm

     (CN) - A Northern California federal court has certified a class and appointed class representation against a military credit card company that allegedly swindled 60,000 soldiers and veterans.
     In 2009, lead plaintiff Taylor Russell sued the federal government for credit cards issued by the Army and Air Force Exchange Service (AAFES), which he said overcharged its customers.
     Russell opened an AAFES account in 1997, went delinquent in 2000, and, through 2005, "AAFES applied an annual percentage rate on his account of 14.25 percent even though the allegedly maximum annual interest rate allowed pursuant to his credit card agreement was never more than 12.25 percent and for most months was 12 percent," a ruling issued Wednesday states.
     Russell's initial class claims were dismissed in June 2010, because he received a full, $150 refund for his individual claim before moving for class certification.
     He appealed the dismissal of one claim - that AAFES overcharged on deferred payment plan (DDP) debt - and, a federal court disagreed that mooting his individual claim warranted dismissing the DDP class claim.
     According to U.S. District Judge William Alsup, "AAFES's credit card agreements have undergone various modifications over the years. Between 1992 and now, the AAFES has modified their standardized agreements at least twenty times.
     "The AAFES allegedly violated these agreements through a common practice of calculating interest charges on delinquent accounts on a fixed rate basis using the prime rate at the time the account became delinquent, instead of periodic adjusting the interest rate."
     AAFES voluntarily corrected delinquent accounts and issued refund checks following Russell's initial suit. By May 2010, it adjusted 149,781 accounts and issued 101,351 refund checks, Alsup wrote.
     However, in March 2012, the AAFES discovered 35 individuals that should have received refunds, "but were inadvertently excluded." And, "approximately 21,000 checks were returned as undeliverable and another 40,000 checks remain uncashed. That is, approximately 60 percent of persons the AAFES determined were owed refunds have not been paid. This amounts to approximately $2 of the $5 million dollars in total refunds the AAFES determined was due," the 15-page ruling continues.
     AAFES failed to resend 60,557 uncashed or returned checks, Alsup said, and, "Only a couple of weeks ago did the AAFES requested (sic) updated mailing addresses from the IRS on these accounts. This was done only after an order denied the AAFES's motion to dismiss on remand."
     Alsup ruled that the class does not include Russell's individual claim, and any class members with claims exceeding $10,000 must expressly opt-in and waive their claims.
     The Army and Air Force Exchange Service, founded in 1895, operates 3,100 facilities in 30 countries, five U.S. territories and 50 states; including convenience and speciality stores, movie theaters and 2,000 fast food restaurants. Its sales totaled $9.9 billion in 2010, according to shopmyexchange.com. Alsup ordered the parties to submit an agreed-upon form of notice, a joint proposal for dissemination of notice and the timeline for opting out of the action by Aug. 9.
     Russell must pay for the cost of notice, and a list of class members must be provided to the court by August 2.