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In re TD Bank, N.A. Debit Card Overdraft Fee Litigation

United States District Court, D. South Carolina, Greenville Division

February 22, 2018



          Bruce Howe Hendricks United States District Judge

         This matter is before the Court on Plaintiffs' motion for class certification (ECF No. 140). Defendant TD Bank, N.A. (hereinafter “Defendant, ” “TD, ” or “the Bank”) filed a response in opposition (ECF No. 142), and Plaintiffs filed a reply in support (ECF No. 143). On May 24, 2017, the Court conducted a hearing on this issue and took the class certification motion under advisement. (See ECF No. 156.) The matter is ripe for consideration.


         Plaintiffs maintain two overarching theories of liability. First, they allege the Bank has engaged in a regular practice of extracting overdraft fees from customers even when their accounts were not actually overdrawn (the “available balance theory”), to the tune of millions of dollars in improper fees. The gravamen of this claim pertains to TD's computerized processing system, which was programmed to deem accounts overdrawn if a transaction was greater than the balance of money in the account minus the amounts of approved debit card transactions, even before such transactions had been presented for payment and while the relevant funds were still in the account. This practice, Plaintiffs note, disproportionately impacts the Bank's most vulnerable customers-those whose available balance tends to approach zero or negative numbers on a recurring basis and who have the least ability to afford sometimes numerous $35 overdraft fees. According to Plaintiffs, this practice breached the Bank's own form contract (Count I), breached the implied covenant of good faith and fair dealing (Count II), amounted to conversion (Count IV), constituted unjust enrichment (Count V), and violated the unfair and deceptive trade practice statutes of several states (Count VI). (See Pls.' Mot. for Class Certification, ECF No. 140-1 at 13, 18-26.)

         Second, Plaintiffs allege that TD has systematically violated federal law by failing to comply with mandatory opt-in requirements imposed by Regulation E (the “Reg E theory”) prior to assessing overdraft fees on one-time debit card and automated teller machine (“ATM”) transactions. The fallout of these regulatory infractions, Plaintiffs contend, has been widespread “opt-in” to the Bank's debit card overdraft program (“Debit Card Advance” or “DCA”) without lawful notice, authorization, and confirmation of enrollment. Plaintiffs further assert that these opt-in practices have been standardized across large swaths of TD's customer base, making class treatment of this claim the only practicable option for the Court, the parties, and the putative class members. Although the same alleged deficiencies did not apply to every customer, Plaintiffs aver that each “channel” for customer opt-in-for example, in-branch or online opt-in-was flawed in the same manner. (See Id. at 13-14, 26-39.)

         Plaintiffs' central argument for class certification is that the Bank's uniform contracts and standardized, automated practices-including computer systems that assessed and collected overdraft fees from the proposed classes with uniform logic- were applied to the putative class members in the same manner as they were to the named Plaintiffs, making the case ideally suited for class treatment. Defendant's main counter-argument is that individual questions will predominate over common questions with regard to all theories, all claims, and all defenses, and that the only way to properly treat the relevant issues would be through thousands, perhaps millions, of mini-trials, thus precluding class treatment across the board.


         Defendant TD Bank, N.A. is a combination of several U.S. banks acquired by its Canada-based parent, Toronto-Dominion Bank, since 2004. The Bank maintains more than 1200 branches across the United States and has more than 8.5 million customers. (See Company Fact Sheet, ECF No. 140-27 at 2.)

         Applicability of the Available Balance Theory

         During all times relevant to this case, the Bank's relationship with its checking account customers has been governed by a form contract called the Personal Deposit Account Agreement (“PDAA”). (See ECF Nos. 140-29 (June 2010 PDAA), 140-30 (Sept. 2011 PDAA), 140-31 (Feb. 2012 PDAA), 140-32 (June 2013 PDAA).) The relevant contractual terms are the same for all checking account customers, and all customer transactions have been and are processed in a uniform, automated manner by the Fidelity IMPACS processing system and TD's debit card management system, the FIS-EFT System (or “Metavante”). (See Tomlinson Dep. 10:16-12:9, ECF No. 140-10 at 5-7.) The Bank maintains archival reports dating back to the early 2000s detailing all customer account transactions that have been processed through its systems. (Id. at 12:20-24, 14:4-21.)

         Beginning in February 2008, as part of a series of progressive changes to its overdraft fee practices called Project MORE (“Making Overdraft Revenue Easier”), the Bank began to take into account all pending transactions, including pending credits, pending debits, and outstanding debit card authorizations, in determining the customer's available account balance to pay items presented for final settlement and payment. (See TD Resp. to Interrog. 4, ECF No. 140-34 at 18; Project MORE Update, ECF No. 140-35 at 2.) This change in available balance calculation practice was part of a phase of Project MORE called “Wave 6.” (See id.) Prior to the implementation of Wave 6, pending transactions were not calculated in the customer's available account balance to pay items presented for final settlement and payment. (See TD Resp. to Interrog. 4, ECF No. 140-34 at 18; Sacknoff I Dep. 34:5-37:8, ECF No. 140-11 at 11.) After this change, if an item posted to an account with a negative available balance resulting from a pending transaction(s), an overdraft fee would be assessed. (ECF No. 140-34 at 18.) However, the Bank would not deduct pending transactions from a customer's available account balance for certain categories of merchants that routinely request authorization for amounts in excess of the likely settlement amount, including hotels and resorts, airlines and cruise lines, car rental companies, and automated gas pumps. (Id.)

         The modifications made to the determination of customers' available balance pursuant to Wave 6 produced a significant increase in annual overdraft fee revenue for the Bank. (See Project MORE Update, ECF No. 140-35 at 2 (projecting a $10 million increase in annual overdraft fee revenue from Wave 6 implementation)); Chevalier III Dep. 82:17-83:18, ECF No. 140-8 at 22 (acknowledging that Wave 6 met TD management's expectations of a 9 to 17 percent increase in revenue from overdraft fees, but stating that the witness did not recall the precise percentage).) The Bank made no change to the PDAA when implementing Wave 6; however, the Bank communicated the relevant changes to its customers through various channels, to include paper mailings, an online landing page, an email to customers who utilize online banking, and a message alerting customers banking by phone. (Sacknoff I Dep. 41:20-42:23, ECF No. 140-11 at 12-13; Chevalier III Dep. 67:1-25, ECF No. 140-8 at 18.)

         TD's overdraft policies, practices, and procedures were implemented uniformly across all branches and in each state where TD has a presence. (See TD Resp. to Interrog. 5, ECF No. 140-34 at 21.) The process of assessing an overdraft fee based on a customer's available balance generally includes the following steps in any particular instance:[1] 1. the customer initiates a debit card transaction at a merchant; 2. the merchant sends TD an electronic authorization request, typically through a third-party processor, which is received by the FIS-EFT System; 3. the FIS-EFT System automatically determines whether the transaction should be authorized based on the transaction information and the customer's account information; 4. the FIS-EFT System makes this determination based on account information provided by Fidelity IMPACS, TD's customer deposit account system of record, which updates customer account balances throughout the day and processes and posts day-to-day transaction activity during nightly batch; 5. in communicating the relevant account information, Fidelity IMPACS assesses the available balance at the time of the merchant's query, potentially available funds in any linked overdraft protection source (e.g., a savings account or line of credit), and the amount to which the particular account is permitted to go into overdraft (permission is based upon an algorithmic scoring matrix specific to the individual account called “OD Points”[2]); 6. if sufficient funds are available based on the foregoing factors as determined by Fidelity IMPACS, the FIS-EFT System sends authorization back to the merchant (if sufficient funds are not available the transaction is declined and no overdraft fee results from the attempt); 7. once the transaction is authorized, the Bank places a “memo hold” on the customer's account in the amount of the authorization request and deducts the amount of the pending transaction from the customer's available balance; 8. the memo hold remains in place until the earlier of (a) receipt of final settlement information for the transaction or (b) three business days; 9. the Bank posts transactions to customers' accounts during the late night or early morning hours of each business day pursuant to the analysis and processing of batch files received from multiple sources (e.g., third-party processors, point of sale and ATM networks, other banks processing checks, entities submitting automated clearing house payments and requests, etc.) in the following order-(a) deposits and other credits that become available to the customer that business day are added to the customer's available balance, (b) subject to certain exceptions, pending electronic debit transactions that have been authorized but not yet presented for final settlement and payment are deducted from the customer's available balance, (c) debit items presented against the customer's account for final settlement and payment are posted to the account in the order of highest dollar amount to lowest dollar amount, within categories;[3] 10. when a debit transaction exceeds the available balance and any linked overdraft protection source it is “flagged” as exceeding available funds; 11. such a flagged transaction is either (a) paid and becomes an overdraft item, or (b) if applicable, returned for insufficient funds (authorized and completed debit card transactions and ATM withdrawals cannot be returned for insufficient funds and so will always be posted and paid once submitted for settlement, even if they exceed the overdraft permission limits on the account);[4] and 12. subject to certain exceptions, debit items paid into overdraft result in the assessment of an overdraft fee, with a limit of five items per account per business day, while items returned for insufficient funds result in a per-item overdraft-return fee. (TD Resp. to Interrog. 10, ECF No. 140-34 at 26-33.)

         Plaintiffs uniformly allege that they were charged overdraft fees as a result of TD's practice of assessing overdraft fees on transactions that did not exceed the actual amount of money remaining in their accounts, but rather exceeded the available balance as systematically calculated by the Bank's computer systems. In her deposition, TD's corporate representative confirmed that Plaintiffs would have been assessed fewer overdraft fees if TD had used the money in the account (i.e., the “current balance” or “ledger balance”) as the measure of whether the account was overdrawn, rather than the available balance. (See, e.g., Sacknoff II Dep. 51:18-52:8 (confirming for Plaintiff Robinson), 99:12-24 (same for Plaintiff Ucciferri), 102:24-103:7 (same for Plaintiff Padilla), ECF No. 140-15 at 15, 27, 28.) Plaintiffs assert that their expert, Mr. Arthur Olsen, has already calculated Plaintiffs' damages under the available balance theory by using the account data that TD has produced to date, and that Mr. Olsen's report shows he will be able to perform a comprehensive damages analysis for the entire “Sufficient Funds Class.” (See Olsen Decl., App. 1, ECF No. 140-21 at 4-5

         (showing putative damages specific to instances where Plaintiffs were assessed overdraft fees on a positive ledger balance); Olsen Report ¶¶ 72-74, ECF No. 140-33 at 22-23 (stating the information needed to perform a class-wide damages analysis and the system for applying a computer algorithm to perform the calculations in an automated way on the entire customer data set).)

         Carolina First Practices Prior to Merger

         Carolina First Bank (“Carolina First”) was a South Carolina chartered banking corporation headquartered in Greenville, South Carolina. Prior to July 1, 2007, Mercantile Bank (“Mercantile”) was a Florida chartered banking corporation headquartered in Jacksonville, Florida. Effective July 1, 2007, Mercantile merged into Carolina First, and Mercantile operations were run as a division of Carolina First under the brand name “Mercantile Bank.” Carolina First (including Mercantile) merged into TD Bank, N.A. on September 30, 2010. However, customers remained subject to Carolina First systems and account agreements until June 2011. Effective June 20, 2011, the legacy Carolina First and Mercantile[5] branches were rebranded as TD Bank, and all customers were converted to TD systems and account agreements. The South Financial Group, Inc. (“TSFG”) was the parent holding company of Carolina First. (See TD Resp. to Request for Admissions, ECF No. 140-42 at 4; Summary of Carolina First Overdraft Policies, ECF No. 140-70 at 2.)

         During all times relevant to this case, Carolina First's relationship with its checking account customers was governed by a form, boilerplate Account Agreement. (See ECF Nos. 140-71 (S.C. Account Agreement), 140-72 (Fla. Account Agreement), 140-73 ( N.C. Account Agreement).) The relevant contractual terms were the same for all checking account customers, and Carolina First utilized uniform fee schedules. (See Aug. 1, 2007 Fee Schedule, ECF No. 140-74.) All checking account transactions were processed in a uniform, automated manner by the On Base processing system. (See Catoe Dep. 13:7-16:20, ECF No. 140-18 at 5-8.) Carolina First maintained, in its On Base storage system, reports detailing all customer account transactions that were processed through its systems, which reports are available for the entire relevant period but for a few random days where data is missing. (Id.)

         In 2005, Carolina First began working with a banking consultant group to implement various overdraft practice changes designed to increase fee revenue. (See TSFG Revenue Enhancement Project, ECF No. 140-75.) First, through a program called “Pay Matrix, ” Carolina First began use of a computer algorithm that automated its decision to pay or return debit items by establishing a dollar amount up to which an account was permitted to go into overdraft. (See id.; Pay Matrix Overview, ECF No. 140-76; Recommendation MX02, ECF No. 140-78.) Carolina First's Pay Matrix program is similar to TD Bank's OD Points program in this respect.

         Second, Carolina First began approving debit card transactions (ATM and point of sale) into overdraft. Prior to this change, debit card transactions were not authorized beyond a customer's account balance. After the change, debit card transactions were authorized up to the account balance plus the overdraft limit imposed by Pay Matrix. (See id.) Carolina First's consultant estimated that implementation of Pay Matrix and extending overdrafts to debit cards would together create between $.8 and $1.5 million in enhanced annual fee revenue. (See Income Initiatives Presentation, ECF No. 140-77; ECF No. 140-78.)

         Third, Carolina First introduced a new batch posting priority sequence in which it posted debits received for final settlement and payment, within categories, in the order of highest-to-lowest dollar amount of the transactions. (TD Resp. to Request for Admission Nos. 1 & 2, ECF No. 140-42 at 9-10.) Specifically, Carolina First began posting all customer-initiated debits in a single group from highest-to-lowest dollar amount. (ECF No. 140-70 at 4.) Previously, the highest volume debits (e.g., checks, ACH, and debit card transactions) were not treated equally for posting purposes. For example, debit card transactions typically posted before checks, which, in turn, typically posted before ACH transactions. Following the change, the highest volume debits had the same posting priority. (Id.) The modifications to posting sequence depleted customer's account balances more quickly, thereby increasing the number of overdraft and returned item fees assessed. (See Recommendation OP01, ECF No. 140-79.) Carolina First's consultant estimated that the posting sequence changes would create between $1 and $1.5 million in additional annual fee revenue. (See id.; ECF No. 140-77.)

         Fourth, Carolina First began to include authorized debit card transactions in its nightly batch processing. These “Point of Sale (POS) holds” reduced the customer's available account balance, and if an item posted to an account with a negative available balance as a result of a POS hold, an overdraft fee would be assessed. (See ECF No. 140-70 at 4.) Carolina First estimated that this change would generate an additional $.8 to $1.2 million in annual fee revenue. (See Revenue Projection Spreadsheet, ECF No. 140-80 at 2.) Ultimately, the income initiatives implemented by Carolina First resulted in significant profits from overdraft fees. Subsequent data analysis showed that annualized “non-sufficient funds” fee income (including overdraft fees) totaled nearly $27 million by 2010. (See JMFA Overdraft Privilege Study, ECF No. 140-85 at 8.)

         Carolina First represents that, before it merged with TD Bank, it engaged in various efforts to disclose its overdraft practices to customers. Beginning in 2005, Carolina First provided its Fee Schedule to customers at account opening, made it available online and at branches, and periodically mailed it to customers when there was a change in fees. (Sacknoff Decl. ¶ 57, ECF No. 142-3 at 24.) In a section entitled “Payment Order of Items, ” the Fee Schedule stated: “Our policy is to pay items received on any one day in the order of the highest dollar amount to the lowest dollar amount.” (Id. ¶ 58 & Ex. 57, ECF No. 142-9 at 59.) The same section warned that the posting order “may increase the overdraft . . . fees you have to pay if funds are not available to pay all of the items.” (Id.) In a section entitled “Non-Sufficient Funds, ”[6] the Fee Schedule stated: “At our discretion, we may . . . authorize an ATM withdrawal and/or debit card purchase that may result in an overdraft to the account.” The same section further stated that if Carolina First decides to pay such a debit item, the customer “shall reimburse us immediately for the amount of the overdraft, plus the Non-Sufficient Funds Item fee in the amount stated on our Fee Schedule.” (Id.) Carolina First mailed customers an overdraft notice each time they overdrew their accounts; displayed customers' available balances online and at the ATM; showed online customers both their posted and pending transactions; offered automatic balance notifications by email or text message; and maintained a written policy to educate customers about Carolina First's overdraft practices when a customer sought a refund of an overdraft fee. (Id. ¶¶ 62-64 & Exs. 49-50, ECF No. 142-9 at 64-68.)

         The Carolina First Plaintiffs (hereinafter “CF Plaintiffs”) allege that Carolina First obscured its overdraft practices by providing inaccurate, incomplete, or misleading information to class members. For example, they assert that the documents relied upon by Carolina First as “disclosures” never advised that Carolina First used available balance to determine overdraft fees. CF Plaintiffs further claim that the terms and conditions document given to customers when they opened an account was never updated to address the changes to overdraft procedure that were implemented. (See Sacknoff II Dep. 160:4-11, ECF No. 140-19 at 42.) Additionally, CF Plaintiffs note, the language on the Fee Schedule regarding insufficient funds states only that an overdraft fee will be assessed when there “are not sufficient funds available in your account.” (See ECF No. 140-74 at 3.)

         Moreover, CF Plaintiffs aver that the Carolina First Account Agreement did not disclose or authorize the practice of high-to-low reordering of debit transactions. They note that the only mention of this practice came in Carolina First's Fee Schedule. (See Sacknoff II Dep. 157:7-158:2, ECF No. 140-19 at 41.)

         CF Plaintiffs' state law claims against Carolina First premised on the available balance theory parallel the claims raised against TD. They allege that Carolina First systematically assessed overdraft fees on transactions that did not exceed the money in their accounts. It is undisputed that CF Plaintiffs would have been assessed fewer overdraft fees if Carolina First had used the ledger balance as the measure of whether the account was overdrawn, rather than the available balance. (See TD Resp. to Request for Admission No. 13, ECF No. 140-42 at 20.) Moreover, CF Plaintiffs' state law claims premised on the high-to-low posting theory allege that they improperly incurred additional overdraft fees as a result of Carolina First's reordering of transactions. Putting aside the question of propriety, the fact that this posting practice resulted in additional fees is unsurprising given that the Fee Schedule itself declares the likelihood of this eventuality. (See ECF No. 140-74 at 3.)

         CF Plaintiffs assert that Mr. Olsen has already calculated their damages under the available balance theory and high-to-low posting theory by using the account data Carolina First has produced in this case. (See Olsen Decl., App. 1, ECF No. 140-21 at 5 (showing putative damages specific to instances where CF Plaintiffs were (a) assessed overdraft fees on a positive ledger balance, and (b) assessed overdraft fees due to resequencing using the positive ledger balance metric).) CF Plaintiffs also claim that Mr. Olsen's report shows he will be able to perform a comprehensive damages analysis for the entire “South Financial Class.” (Olsen Report ¶¶ 72-74, 80-82, ECF No. 140-33 at 22-25 (stating the information needed to perform a class-wide damages analysis and the system for applying computer algorithms to perform the calculations in an automated way on the entire customer data set).)

         Applicability of the Reg E Theory

         In November 2009, the Board of Governors of the Federal Reserve System (“the Board”) amended Regulation E (“Reg E”), which implements the Electronic Fund Transfer Act (“EFTA”), in order to limit the ability of a financial institution to assess an overdraft fee for paying ATM and one-time debit card transactions that overdraw a consumer's account, unless the consumer affirmatively consents, or opts in, to the institution's payment of overdrafts for these transactions. See 74 Fed. Reg. 59033 (Nov. 17, 2009). A few months later, the agency amended Reg E and the official staff commentary again in order to clarify certain aspects of the Reg E final rule. See 75 Fed. Reg. 31665 (June 4, 2010). The background for this rule change was that regulators found that consumers had often been enrolled in overdraft services without their consent. 74 Fed. Reg. 59038 (Nov. 17, 2009). The Board's research further indicated that the large majority of overdraft fees were paid by a small portion of consumers who frequently overdrew their accounts and who may have had difficulty both repaying overdraft fees and bringing their accounts current, which would in turn cause additional overdraft fees. Id. The Board believed that, on balance, an opt-in rule would create the optimal result for consumers with respect to ATM and one-time debit card transactions specifically. See id.

         Like all banks subject to the Board's regulatory action, TD responded to the new regulations with new procedures to educate customers concerning their options regarding overdraft services and implemented new protocols to enroll customers from whom affirmative consent (opt-in) had been obtained. The Reg E amendments, 12 C.F.R. § 1005.17(b), imposed the following requirements on the opt-in process:

(1) General. Except as provided under paragraph (c) of this section, a financial institution holding a consumer's account shall not assess a fee or charge on a consumer's account for paying an ATM or one-time debit card transaction pursuant to the institution's overdraft service, unless the institution:
(i) Provides the consumer with a notice in writing, or if the consumer agrees, electronically, segregated from all other information, describing the institution's overdraft service;
(ii) Provides a reasonable opportunity for the consumer to affirmatively consent, or opt in, to the service for ATM and one-time debit card transactions;
(iii) Obtains the consumer's affirmative consent, or opt-in, to the institution's payment of ATM or one-time debit card transactions; and
(iv) Provides the consumer with confirmation of the consumer's consent in writing, or if the consumer agrees, electronically, which includes a statement informing the consumer of the right to revoke such consent.

12 C.F.R. § 1005.17(b)(1)(i)-(iv). Prior to these amendments, the Bank's practice was to automatically enroll customers into overdraft services for all transaction types. (Sacknoff Decl. ¶ 7, ECF No. 142-3 at 2-3.) After the amendments, beginning in May 2010, the Bank began to offer customers three options: (1) “standard” overdraft services, which cover check, automated clearing house (“ACH”), and other transactions not subject to Reg E; (2) TD Debit Card Advance (“TDDCA”), which extends overdraft services to ATM and one-time debit card transactions; and (3) a “decline all option, ” which opts the customer out of overdraft service for all transaction types (though this option is not itemized on the Bank's informational or enrollment forms). (Id. ¶ 10, ECF No. 142-3 at 3-4.) If a customer does not enroll in TDDCA, the Bank excludes overdraft coverage for ATM and one-time debit card transactions from the customer's account, and declines any such transactions that exceed the customer's available balance. (Id.)

         The principal document that the Bank has used to inform customers about their overdraft options is TD's version of the Board's Model A-9 form, which was set forth in Appendix A of 12 C.F.R. § 1005.17 when the amendments were made to Reg E. According to the Bank, it made only one relevant alteration to the model form, namely, the addition of the word “available” to the Board's proposed language, so that the Bank's form reads: “An overdraft occurs when you do not have enough money available in your account, but we pay it anyway.” (See Id. ¶ 11, ECF No. 142-3 at 4; TD Reg E Form, ECF No. 142-4 at 36-37 (emphasis added).) This form constituted the Bank's effort to comply with the notice requirement cited supra, 12 C.F.R. § 1005.17(b)(1)(i). Reg E permits banks to use overdraft disclosures “substantially similar to Model Form A-9.” 12 C.F.R. § 1005.17(d).

         TD mailed its Reg E Form to all existing personal checking account customers with their June 2010 statements and re-sends the form annually with the Bank's privacy notice. (Sacknoff Decl. ¶ 13, ECF No. 142-3 at 5.) The June 2010 statement mailing included additional educational materials indicating that the new regulation was set to take effect in August 2010, providing a link to the relevant Federal Reserve consumer information webpage, explaining customers' options, and listing various ways to avoid overdraft fees (e.g., linked savings account or credit line). (See Id. ¶ 14 & Ex. 6, Changes to Your Debit Card Mailer, ECF No. 142-5 at 3-4.) The Bank supplemented the statement mailings with additional mailings to customers who had used overdraft services in the past in an effort to, according to TD, ensure that such customers would not be surprised if the Bank declined their ATM and one-time debit card transactions because they had neglected to opt-in prior to the August 2010 regulatory implementation date. (See Id. ¶ 15 & Ex. 7, Supplemental Reg E Mailers, ECF No. 142-5 at 8-13.) In the spring and summer of 2010, TD employees also called some customers who had incurred one or more overdraft fees in 2009 and responded to calls from customers who had questions about the DCA program. (Id. ¶ 17.) The Bank provided training to its customer service representatives, branch employees, and branch managers on how to speak directly with customers about the regulatory change, answer customer questions, and assist customers with making informed decisions based their individual needs and circumstances. (See Id. ¶ 18 & Exs. 8-9, Reg E Staff Training Materials, ECF No. 142-5 at 15-43.) For example, one section of training materials applicable to all store and call center staff stated:

Customers who prefer to be declined when they use their debit card and have insufficient funds, should not be enrolled in TD Debit Card Advance, and will have their debit card overdraft coverage turned off as of 8/14. Each choice presents its own advantages and disadvantages, making it important [sic] us to present Customers with all options and help them determine which is best for their unique situation.

(ECF No. 142-5 at 21.)

         More generally, Lindsay A. Sacknoff, Senior Vice President and Head of Consumer Banking Business Management and Governance at TD Bank, has explained the overall context of customer enrollment in the Bank's DCA program during the relevant time period in the following manner:

Both during and after 2010, customers have learned about the Bank's overdraft practices when presented with the option to enroll in TDDCA. Bank customers may enroll in or unenroll from TDDCA at the branch, by telephone, online and through the Bank's mobile app. The enrollment processes are customized for each of these channels, have evolved over time, and vary depending on whether the customer is new or existing.

(Sacknoff Decl. ¶¶ 2, 19, ECF No. 142-3 at 1, 7.) In her declaration, Ms. Sacknoff goes on to summarize the DCA enrollment procedures applicable to each delivery channel, including: branch enrollment for new customers, branch enrollment for existing customers, telephone enrollment, online enrollment for new customers, online enrollment for existing customers, and mobile enrollment. (Id. ¶¶ 20-26, ECF No. 142-3 at 7-11.)

         Depending on the delivery channel relevant to any individual customer, the DCA enrollment procedures may involve differing protocols including, but not limited to: unscripted conversations between a branch employee and the customer regarding overdraft services, verbal elections to enroll or not enroll in TDDCA made by the customer (whether in a branch or on the telephone), employee entry of the customer's election into the Bank's computer system, printed copies of the Bank's Reg E Form with a checked box (prior to January 2014) or customer signature (since January 2014) indicating the customer's DCA election, mailed written notice confirming the customer's verbal DCA election, oral disclosures read over the telephone by a customer service representative (“CSR”) to the customer regarding the overdraft service options, scripted responses to Frequently Asked Questions provided to CSRs and branch employees, online checkboxes requiring the customer to acknowledge that he/she read the Reg E Form, online links to the Reg E Form either requiring the customer to click on the link prior to completing enrollment (since 2015) or not requiring the customer to do so (prior to 2015), and mobile application screens requiring the customer to acknowledge having read the form before enrolling and then check an electronic box. (See id.)

         In the motion for class certification, Plaintiffs raise generalized theories of unfairness regarding the Bank's implementation of the amendments to Reg E. Specifically, Plaintiffs assert that the Bank, in an effort to stem projected losses to overdraft revenue, engaged in strategies to maximize customer opt-in to TDDCA, particularly targeting vulnerable customers who may be least able to afford fee-based overdraft products. (See ECF No. 140-1 at 28-32.) Citing a Financial Institution Letter issued by the Federal Deposit Insurance Corporation that counsels against steering such customers to opt-in (see Id. at 28), Plaintiffs vaguely allude to TD “policies” designed to “avoid compliance” with Reg E when describing the Bank's marketing plan to keep eighty-five percent (85%) of “heavy overdrafters” enrolled in the DCA program. (See Id. at 29-31.) While these practices, as presented, sound nefarious, it is not immediately clear how this aspect of Plaintiffs' claim translates into a private right of action for violation of Reg E. The Bank's marketing goals and intent to preserve overdraft revenue, whether honorable or ignoble, are of questionable relevance to the merits of the Reg E theory and entirely immaterial to the class certification questions currently before the Court. The content of the Bank's written/electronic disclosure to customers and subsequent compliance with the strictures of customer enrollment enumerated in 12 C.F.R. § 1005.17(b), not the Bank's revenue aspirations or putative dearth of virtuous intent, will control the viability of Plaintiffs' Reg E claim.

         Plaintiffs allege that TD's enterprise-wide opt-in process failed to comply with Reg E in five specific ways. First, they assert that the Bank's Reg E Form inaccurately described an overdraft as occurring “when you do not have enough money available in your account to cover a transaction.” (See, e.g., R. Ryan DCA Opt-In, ECF No. 140-64 at 2.) They contrast this description with their own formulation, which they aver to be more accurate, that an overdraft occurs “when there is a negative available balance in the account even if there is enough money to cover the transaction.” (ECF No. 140-1 at 35.) Accordingly, Plaintiffs claim that this “misstatement” of the Bank's overdraft practice rendered the Reg E Form a non-conforming disclosure. (Id.)

         Second, Plaintiffs allege that, for customers who opted into TDDCA by telephone or online, TD either failed to provide the Reg E Form, or failed to ensure that it was provided to customers segregated from all other information prior to obtaining their affirmative opt-in. Plaintiffs' banking supervision and regulation expert, Bonita Jones, notes in her report that the Bank's website is, or has been, set up in such a manner that there is no default screen or link that ensures the customer sees and reviews the opt-in disclosure before selecting enrollment in the DCA program by checking an on-screen box. (Jones Report ¶ 37, ECF No. 140-60 at 19.) Rather, states Ms. Jones, later in the enrollment process, after the box is already checked, the customer could proactively select the disclosure notice but need not necessarily do so. (Id.) Moreover, she notes that the hyperlink file icon that leads to opening the disclosure is not properly segregated from a number of other notices in the form of icons. (Id.)

         Third, Plaintiffs allege that TD failed to obtain affirmative consent during the opt-in process. Specifically, Plaintiffs aver that TD's practice (prior to December 2014 for branch enrollment) of branch employees checking a box on the employee's computer screen to enroll customers into DCA, rather than allowing customers to check the box themselves or sign the Reg E Form, violated the affirmative consent requirement of 12 C.F.R. § 1005.17(b)(1)(ii).

         Fourth, Plaintiffs allege that customers enrolled online from December 2011 through July 2015 did not receive the requisite confirmation letter or copy of their signed Reg E Form, including a statement informing the customer of the right to revoke consent, following the opt-in procedures. While the Bank has admitted a failure to provide written confirmation of opt-in to certain customers during the itemized time period and refunded a portion of the overdraft fees assessed against those customers, Plaintiffs claim that the Bank's partial refund of fees did not remedy the violation of 12 C.F.R. § 1005.17(b)(1)(iv).[7] Moreover, Plaintiffs aver that TD failed to provide any confirmation of opt-in to customers who enrolled in branches prior to January 2014, but to date has not admitted this failure.[8] (See ECF No. 140-1 at 37.)

         Fifth, Plaintiffs allege that TD's enrollment confirmation forms were universally deficient because they do not include notice that the customer has a “right to revoke” his/her consent to DCA enrollment. See 12 C.F.R. § 1005.17(b)(1)(iv). Here, Plaintiffs aver that the Bank's statement in confirmation letters and on the Reg E Form-“You may change your enrollment status any time” (see, e.g., R. Ryan DCA Opt-In, ECF No. 140-64 at 2)-is insufficient to comply with the “strong language” of revocation itemized in the regulation. (ECF No. 140-1 at 37.)

         Plaintiffs assert that their expert has already calculated Plaintiffs' damages under the Reg E theory by using the data that TD has produced in this case. (See Olsen Decl., App. 1, ECF No. 140-21 at 4-5 (showing putative damages on Reg E transactions specific to each Plaintiff).) Moreover, in his report Mr. Olsen claims that he will be able to perform a comprehensive damages analysis for the entirety of the Reg E Class, incorporating variables for differing time periods depending on the channel used to purportedly opt-in any given customer and disputes between the parties over what portion of subsequent overdraft fees would be refundable if Plaintiffs' Reg E claims were successful. (Olsen Report ¶¶ 75-76, ECF No. 140-33 at 22-23) (stating the information needed to perform a class-wide damages analysis and the system for applying a computer algorithm to perform the calculations in an automated way on the entire customer data set).)


         A. Legal Standard

         Rule 23(a) of the Federal Rules of Civil Procedure identifies the prerequisites for a class action as follows:

(a) Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a); see generally Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, 133 S.Ct. 1184, 1191 (2013); Gray v. Hearst Commc'ns, Inc., 444 F. App'x 698, 700 (4th Cir. 2011); Brown v. Nucor Corp., 576 F.3d 149, 152 (4th Cir. 2009); Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 339 (4th Cir. 2006). These four prerequisites for class certification under Rule 23(a) are commonly referred to as “numerosity, commonality, typicality, and adequacy of representation.” See id.

         In addition to the requirements of Rule 23(a), Plaintiffs must also meet the requirements for maintenance of a class action imposed by Rule 23(b)(3)-namely, that “the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”[9] Fed.R.Civ.P. 23(b)(3).

         Factors pertinent to a determination whether the “predominance” and “superiority” requirements have been satisfied include:

(A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action.


         “Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule-that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011) (emphasis in original). Certification is only proper if the Court, after conducting a “rigorous analysis, ” is satisfied that the prerequisites of Rule 23 have been satisfied. See Id. at 350-51. “Frequently that ‘rigorous analysis' will entail some overlap with the merits of the plaintiff's underlying claim. That cannot be helped.” Id. at 351. However, “‘Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage, '” and “the merits of a claim may be considered only when ‘relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.'” Brown v. Nucor Corp., 785 F.3d 895, 903 (4th Cir. 2015) (quoting Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 568 U.S. 455, 466 (2013)). “Plaintiffs bear the burden of demonstrating satisfaction of the Rule 23 ...

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