Veterans to Collect on Credit Card Overcharges

     (CN) – Uncle Sam can pay $2.7 million to settle claims that its military credit card swindled 63,000 soldiers and veterans on bogus interest charges, a federal judge ruled.
     Lead plaintiff Taylor Russell had sued the U.S. government in 2009 over the inflated interest rates that came with credit cards issued by the Army and Air Force Exchange Service (AAFES).
     Russell allegedly opened an AAFES account in 1997 and went delinquent in 2000. Through 2005, AAFES allegedly “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,” according to an earlier ruling in the case.
     That 2012 decision had said Russell could bring a class claim – that AAFES overcharged on deferred payment plan (DDP) debt – even though he received a full, $150 refund for his individual injury.
     “AAFES’s credit card agreements have undergone various modifications over the years,” U.S. District Judge William Alsup wrote. “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,” Alsup added.
     Last week, Alsup approved a proposed settlement in the case and ordered AAFES to pay more than $2.7 million into a settlement fund.
     Though AAFES voluntarily corrected delinquent accounts and issued $1.9 million in refund checks following Russell’s initial filing, it “inadvertently excluded” 35 individuals that should have received refund checks, Alsup said.
     Additionally, “approximately 21,000 checks were returned as undeliverable and another 40,000 checks remain uncashed,” according to the ruling.
     “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.”
     AAFES failed to resend 60,557 uncashed or returned checks, Alsup added.
     The parties calculated the total settlement by adding the value of refund checks issued in 2010 and 2012 – $1,971,074.02 and $306,232.55, minus $3,815 in checks issued to those opting out – plus an additional $500,000, for a total amount of $2,773,491.57.
     The settlement class includes about 63,000 members, the ruling states.
     No class objections were received, nine members opted out, and 10 more were deemed to have opted out because they cashed original refund checks after notice of the settlement, Alsup added.
     Alsup granted Russell a $200 incentive award, though the settlement provided for $5,000 maximum.
     “Incentive awards are discretionary and, when allowed, ‘are intended to compensate class representatives for work done on behalf of the class,'” Alsup said, citing a 9th Circuit ruling from 2003, Rodriguez v. West Publishing Corp.
     “For many decades, class actions got along very well without any ‘incentive fees,'” Alsup wrote. “The advent of such requests in recent years raises the danger that the class settlement is too low and the class representative is being placated with a special payment no one else gets. If the settlement is not good enough for the class representative, then it is not good enough for the class.
     “On average, class members stand to recover roughly $36.00 per refund check. Upon review of the list of refund checks issued it becomes clear that checks for a higher amount than $100.00 are outliers. Given the large disproportion of the requested incentive awards to the amount recovered by the individual class members, a downward adjustment of the awards is warranted.”
     Alsup also “tentatively granted” $786,473.75 in attorneys’ fees and expenses to be paid from the fund.
     “Counsel must pay attention to how the administrator is managing the fund and keep track of how AAFES resolves the second round of mailings,” Alsup said. “Mistakes may lead to shortfalls and those shortfalls may have to be paid out of the reserved attorney’s fees.”
     The Army and Air Force Exchange Service, founded in 1895, operates 3,100 facilities in 30 countries, five U.S. territories and 50 states. These facilities include convenience and specialty stores, movie theaters and 2,000 fast food restaurants. Its sales totaled $9.9 billion in 2010, according to

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