American ATM users may be eligible for compensation from a new class-action settlement with Flagstar Bank — and they don’t need to prove they were directly harmed to receive money.
The $1.23 million settlement resolves allegations that Flagstar Bank, formerly known as New York Community Bank (NYCB), improperly charged certain ATM, non-sufficient funds (NSF), and overdraft fees to U.S. banking customers.
Why It Matters
This settlement highlights the growing focus on how banks assess fees, and reflects wider concerns about transparency, consumer financial protection, and accountability within the U.S. banking system.
Key Details
Flagstar Bank, which operated under the NYCB name until 2024, agreed to pay $1.23 million to resolve claims that it imposed unfair ATM, NSF, and overdraft fees.
Plaintiffs argued that these fees conflicted with the bank’s stated policies and unfairly targeted customers in particular transaction scenarios.
The settlement covers two main groups of customers:
- NSF and Overdraft Fee Group
- Customers who held checking accounts at Flagstar Bank (then NYCB) between March 2, 2017, and January 1, 2020
- And who were charged certain non-sufficient funds and overdraft fees on check or automated clearing house (ACH) payments
- ATM Fee Group
- Account holders who were charged more than one out-of-network ATM fee for a withdrawal that was preceded by a balance inquiry
- Between August 20, 2020, and February 20, 2024
ACH payments are electronic transfers between U.S. bank accounts, commonly used for direct deposits, bill payments, and other routine transactions.
How Payouts Will Work
Under the settlement, eligible class members will receive cash payments based on the fees they were charged.
- Those who paid retry NSF fees and/or overdraft fees on check or ACH transactions will receive a proportional share of the settlement fund, calculated according to the total amount of fees they incurred.
- Those who were charged multiple out-of-network ATM fees on a withdrawal after a balance inquiry are entitled to a flat payment of $25.
Payments will be issued either as:
- An account credit for current Flagstar Bank customers, or
- A check for former customers.
Importantly, all eligible class members will automatically receive payment after the settlement receives final approval — no proof of charges or claim form is required.
What Is a Class Action Settlement?
A class action settlement resolves a lawsuit brought on behalf of a large group of people (the “class”) who share similar claims against a company or organization. Rather than each person filing a separate lawsuit, one case is used to represent everyone affected.
When the parties settle, the defendant typically agrees to pay a lump sum into a settlement fund. That money is then distributed to class members according to set criteria — such as how much they paid in fees or how they were impacted by the conduct at issue.
What Happens Next
If the court grants final approval, eligible customers will automatically receive compensation. The settlement represents a notable outcome for affected account holders and may influence how other U.S. banks handle similar fee-related disputes in the future.
- Anyone wishing to opt out of the settlement must do so by December 15, 2025.
- A final approval hearing is scheduled for January 13, 2026.
If the settlement is approved at that hearing, payments will be distributed afterward.
