Credit Union and Elavon: closed account and acceptance of refund/credit

Question

I was issued a refund by a vendor on 3.11.22 to a debit card of an account that I had closed in October 2021. She did not ask me what card to refund, she just refunded it.

She got an error saying that the account was closed and the transaction denied. Elavon confirmed it was a hard decline. (She tried to refund another card I had used to pay for something else after that, but Elavon declined it as a duplicate charge and it never went through to the other card either. However, she was charged for both.)

Then, on 3.15.22, I get a text from this credit union saying I had $2,150 in my account. A few days later, I get a check in the mail for $2,150. I go into the CU to talk to them, they assure me that even though my account was closed, they had to reopen the account to take this debit card refund and that this was normal procedure and that I was safe to cash the check.

Then, a month later, on April 18th, I get a text saying that I have a negative bank balance of $2,150. I'm shocked, again, as this is the second time my closed account has been opened to unauthorized charges.

I contacted the vendor, who stated she had not issued any kind of chargeback to take the refund back. She called Elavon several times to figure out what went wrong, but Elavon told her the charge didn't go through. Elavon refused to speak to me because I'm not their customer.

After many, many attempts to get this resolved, I had to legally compel Elavon to respond to why the refund was taken back. I have a formal letter saying that they reversed the refund (with no prompt from the vendor) because the account was closed and the money never went through. Except that the credit union DID open up my bank account both times. What is missing here in the process? Something has to be missing - some step where Elavon and the financial institution would work together to be in agreement that the funds did or did not come through, otherwise this kind of thing would happen all the time, and the NCUA seemed pretty horrified and shocked about this, but they don't have jurisdiction over this credit union.

I sent this on to Columbia Credit Union, and they refuse to respond. They refuse to work with Elavon to tell them that they opened the account, etc.

The vendor said she doesn't have the money (she could be lying, she's a co-defendant in the small claims case, so hopefully we can prove she doesn't), but this seems like a clerical error that needs to be resolved by the credit union, in line with the protections of the Electronic Funds Transfer Act that prohibits credit unions and banks from not fixing errors if pointed out to them in the designated time frame. I know that they are allowed to send back ACH's if the account is closed, and their member agreement mentions nothing about opening up closed accounts without a preauthorized transaction, let alone doing so after a hard decline and not properly communicating with the credit card processor. In fact, their member agreement makes several mentions of them having the right to decline any transaction and they would not be at fault. They keep saying they were required by law to open up the account, yet I can't find anything to support that statement. In fact, the CFPB issued a Circular saying that they should NOT open up closed bank accounts because it's an abusive and unfair practice under federal law.

I am taking them to small claims court, and they're countersuing me for the amount plus 9% interest and an attorney will be representing them in small claims court. Am I completely in the wrong here?

Answer 1

She did not ask me what card to refund, she just refunded it.

Standard practice is to refund the money to the card it came from. That's usually also the right practice. You hit the rare case where the card was cancelled before the refund was attempted.

She got an error saying that the account was closed and the transaction denied.

At which point you and she should have made other arrangements for the refund she owed you.

Then, a few days later, I get a text from this credit union saying I had $2,150 in my account.

If the vendor said the credit didn't go through, this was spurious money. Unless the vendor told you that they had tried again and it worked this time, you should have left it untouched in the account, knowing that it would vanish again when the cancellation caught up with it. The credit union employee did advise you poorly, perhaps not understanding that this was a cancelled transaction.

Then, a month later, I get a text saying that I have a negative bank balance of $2,150.

Because you withdrew the money that was a temporary illusion rather than waiting for that to settle out. If you had left it in the account, the correction would have cancelled out the failed credit and you would owe nothing. Always beware of delayed transactions and late voiding; processing can sometimes be delayed.

The vendor said she doesn't have the money

She may be confused rather than lying, but she's wrong. It was returned to her when her attempt to credit you failed; if she didn't give it to you another way, she still has it. (If she did .. "no double dipping".)

I am taking them to small claims court, and they're countersuing me

If "them" is the credit union, you're going to lose. They processed the failed transaction in an annoyingly slow manner, but they did process it correctly, and if you took money out of an account that wasn't there you owe them it plus interest and/or fee, just like any other charge or cash advance or overdraft.

You should be suing the vendor with the credit union's assistance, not the other way around. She still owes you that money, unless she has paid you another way.

If this hasn't yet gone to court, there may still be time to talk to the credit union, withdraw your suit against them, and sue the vendor for the amount owed you. You will certainly have to repay the phantom money that you withdrew. You may also have to pay the interest, unless you can convince the credit union it was their fault for misleading you and get them to waive that. At least it's a credit union; they care more about their depositors than banks do, so some compromise may be possible.

an attorney will be representing them in small claims court.

You should expect that if you are bringing suit against a company. That's what they have lawyers on retainer for. If you have a good case, that isn't necessarily a problem.

Unfortunately, as mentioned above, I don't think you have a good case against the credit union. Go after the vendor. Who will send their lawyer, but that's OK.