MARTINSBURG, W.V.—A federal judge with the U.S. District Court for the Northern District of West Virginia has certified a class action alleging Pentagon Federal Credit Union illegally charged West Virginia borrowers a $5 fee for making loan payments by telephone, clearing the way for thousands of consumers to seek damages.
The lawsuit was filed by Joseph Boczek, who refinanced an auto loan with the $35-billion credit union in 2022. Boczek alleges PenFed charged him a “pay-to-pay” fee each time he made a monthly payment by phone, even though his loan agreement did not authorize the fee and state law prohibits lenders from imposing charges not expressly permitted.
According to court documents, PenFed assessed at least 1,497 such fees on 422 consumer loans tied to West Virginia borrowers. Boczek claims the credit union’s cost to facilitate the payments was about 30 cents per transaction, meaning the remaining amount represented profit.
Wrongdoing is Denied
In its response, Virginia-based PenFed has denied wrongdoing and argued the case should not proceed as a class action, saying individual borrowers may have had different loan types, circumstances or payment methods. But Chief U.S. District Judge Gina M. Groh rejected those arguments, finding that the legality of the fee is a common question that applies to the entire group.
“This matter centers on whether PenFed was permitted to charge the pay-to-pay fee to consumer borrowers under West Virginia law,” Groh wrote. “That question predominates over any individualized issues.”
The certified class covers all individuals with West Virginia addresses who held loans or lines of credit serviced by PenFed and who paid a telephone or electronic payment fee during the applicable statute of limitations period.
Case Brought Under West Virginia Law
The case is brought under the West Virginia Consumer Credit and Protection Act, which prohibits creditors from collecting fees or charges not authorized by statute or contract. The law allows for statutory penalties and attorney’s fees in addition to potential damages.
Class counsel must now submit a proposed notice to borrowers informing them of their right to remain in or opt out of the lawsuit. A schedule for the remainder of the case, including potential discovery and trial, will be set separately.
PenFed, headquartered in Tysons, Va., has more than 2.9 million members.
