Flagstar Bank class action overview:
- Who: A Florida resident is suing Flagstar Bank.
- Why: The plaintiff alleges Flagstar Bank employed deceptive practices when giving out certificate of deposit accounts.
- Where: The class action was filed in a Florida federal court.
- How to get help: Consumers may be able to take legal action if Flagstar Bank converted their high-interest CD accounts to low-interest CD accounts when they matured.
Flagstar Bank has been hit with a class action lawsuit accusing it of deceptive practices involving certificate of deposit (CD) accounts.
Plaintiff Tunny Solomon filed the class action complaint against Flagstar Bank N.A. on Nov. 13 in a Florida federal court, alleging violations of state and federal consumer laws.
The Florida resident alleges that the bank — acting as the successor to New York Community Bank — rolled funds from matured CDs into new long-term CDs with interest rates that were far below market level and the original contractual terms.
Solomon says she opened a 14-month CD in 2018, depositing $50,000 at a 2.65% interest rate.
When the CD matured in December 2019, Flagstar allegedly failed to follow the account terms requiring funds to be transferred to an interest-bearing savings account.
Instead, the funds were reportedly moved into a 300-month CD with a small, 0.02% interest rate — significantly less than the original agreement, the Flagstar Bank lawsuit alleges.
Plaintiff claims long-term ‘zombie’ CDs caused financial losses
Solomon claims this practice was conducted without notice or consent, labeling the unauthorized accounts “zombie CDs.” The lawsuit also alleges the bank avoided sending required quarterly statements, leaving customers unaware of these transactions for years.
The class action alleges that Flagstar profited at its customers’ expense by tying up funds in low-yield CDs.
“Defendant’s actions not only breached their contractual obligations but also unfairly deprived customers of significant earnings,” the Flagstar class action alleges.
Solomon says, had the funds been properly transferred to a savings account, she would have received higher interest, aligning with the original agreement.
As a result, she is suing on behalf of anyone in the United States who bought a certificate of deposit from Flagstar Bank, the funds of which were transferred upon maturity to another certificate of deposit without authorization from the account holder, in the past four years.
She is suing for breach of contract, unjust enrichment, and violations of banking regulations, and is seeking certification of the class action, damages, fees, costs, a jury trial and injunctive relief to prevent Flagstar from continuing the alleged practices.
Flagstar Bank was also sued in 2022 when it allegedly failed to secure the private and personally identifiable information of around 1.5 million of its customers during a December 2021 data breach.
What do you think of the allegations in the Flagstar Bank class action? Let us know in the comments.
The plaintiff is represented by Seth M. Lehrman of Lehrman Law and Scott D. Owens.
The Flagstar Bank class action is Tunny Solomon v. Flagstar Bank N.A., Case No. 1:24-cv-24482-XXXX in the U.S. District Court for the Southern District of Florida.
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