By As Law Online 
Bank customers across the country have long complained about unexpected fees that quietly drain checking accounts. A $1.23 million class-action settlement involving Flagstar Bank (formerly New York Community Bank) now offers some relief for those hit with certain retry fees and out-of-network ATM charges. If you held a checking account with New York Community Bank during specific periods and paid these disputed fees, you may already qualify for an automatic payment or account credit under the Flagstar ATM Fee Lawsuit.
This guide breaks down the background of the case, who is eligible, how much you might receive, and the practical steps involved. It also covers the legal issues at stake and what the settlement means for consumer protection in banking.
Background of the Flagstar ATM Fee Lawsuit
The lawsuit, officially titled US Realty Group LLC, et al. v. New York Community Bank (Case No. 23-cv-01609-KAM-SIL), was filed in the United States District Court for the Eastern District of New York. Plaintiffs Michelle Sapozhnikov and US Realty Group LLC brought claims on behalf of two groups of checking account holders.
They alleged that New York Community Bank improperly assessed certain nonsufficient funds (NSF) fees, overdraft fees, and out-of-network ATM fees in ways that violated the bank’s own account agreements and New York consumer protection law, specifically General Business Law § 349.
New York Community Bank later became part of Flagstar Financial after corporate changes, including the acquisition of Flagstar Bank and a 2024 rebrand. The settlement names the bank under its prior identity because the disputed practices occurred before the name change. The bank denied any wrongdoing but agreed to settle to avoid the costs and uncertainty of further litigation.
The case focused on two distinct practices that many customers found frustrating and hard to track.
The Retry Fee Allegations
Merchants sometimes re-submit a check or Automated Clearing House (ACH) payment after a bank returns it for insufficient funds. Plaintiffs claimed the bank charged a new NSF or overdraft fee each time the same item was presented again, even though it stemmed from a single customer transaction. These are known as retry fees.
The class period for these fees ran from March 2, 2017, through January 1, 2020. Customers could face multiple $30-plus charges on one bounced payment, quickly adding up.
The Out-of-Network ATM Fee Claims
The second set of claims involved out-of-network ATM use. Plaintiffs alleged that when a customer checked their balance at a non-bank ATM and then withdrew cash, the bank treated the balance inquiry and the withdrawal as separate transactions. This resulted in two out-of-network ATM fees instead of one.
The relevant period for these OON Fees was August 20, 2020, through February 20, 2024. Many customers said they never expected a second fee simply for checking their balance before taking cash.
These practices sit at the center of broader debates about hidden bank charges and financial consumer protection. Banks argue that fee schedules and account agreements disclose the charges. Consumer advocates counter that the way fees stack on re-presented items or balance inquiries can surprise ordinary account holders.
Who Qualifies for the Settlement?
Eligibility is determined by the bank’s own records. You do not need to submit a claim form or provide proof of the fees. If the bank’s data shows you were charged the relevant fees during the class periods, you are included unless you previously opted out.
There are two settlement classes:
- Multiple Fees Class: Checking account holders charged one or more NSF or overdraft fees on the same ACH transaction or check between March 2, 2017, and January 1, 2020. This group accounts for the larger share of the settlement fund (about 73.6 percent, or roughly $907,856 of the total).
- OON Fees Class: Account holders charged more than one out-of-network ATM fee on a withdrawal that followed a balance inquiry between August 20, 2020, and February 20, 2024. This group receives about 26.4 percent of the fund (around $325,644).
You can belong to both classes if you experienced both types of fees. Current and former account holders are covered. The settlement administrator identified class members from bank records and sent notices accordingly.
If you never received a notice, you can still check the official settlement website (nycbsettlement.com) or contact the administrator for confirmation. Keep in mind that the opt-out deadline of December 15, 2025, has passed. The court granted final approval on February 20, 2026.
Settlement Amount and Payout Details
The total settlement fund is $1,233,500. After deductions for attorneys’ fees (up to one-third, or about $411,167), litigation costs (around $8,086), service awards to the two class representatives (up to $15,000 each), and administration expenses (estimated at $64,439), the remaining net fund is distributed to class members.
Payouts work as follows:
- Members of the Multiple Fees Class receive a proportional share based on the total number of qualifying NSF or overdraft fees they were charged during the class period. The more qualifying fees you paid, the larger your share of that portion of the fund.
- Members of the OON Fees Class receive a payment calculated on a per-fee basis under a similar proportional formula. Many reports describe a flat $25 payment for those who incurred the extra ATM fees, though the exact amount depends on the final net fund and the number of eligible fees across the class.
Current account holders receive their share as an automatic credit to their Flagstar/New York Community Bank checking account. Former account holders receive a check mailed to their last known address on file. Checks typically expire after 180 days.
Because payments are automatic, no action is required from eligible class members who did not opt out. Distribution began after the settlement became final following the February 20, 2026, court order. If you have not yet received a credit or check and believe you qualify, contact the settlement administrator using the information on the official website.
Individual amounts vary. Someone charged only one or two qualifying fees may receive a modest payment, while those hit with multiple retry fees over the years could see a higher proportional share. The settlement does not restore every dollar of disputed fees. It provides a practical recovery after years of litigation risk and delay.
How the Settlement Process Worked
Class actions involving bank fees often follow a predictable path. Plaintiffs file a complaint alleging breach of contract, unjust enrichment, and violations of consumer protection statutes. The bank moves to dismiss or for summary judgment, arguing that its disclosures authorized the fees. Discovery follows, with both sides examining account agreements, fee schedules, and transaction data.
In this case, the parties reached a settlement agreement that received preliminary approval in October 2025. Notice went out to potential class members. The final approval hearing, originally set for January 13, 2026, was rescheduled to February 12, 2026. On February 20, 2026, the court entered an order granting final approval and judgment.
This timeline is typical. Courts examine whether the settlement is fair, reasonable, and adequate for the class as a whole. Factors include the strength of the claims, the risks of continued litigation, the amount of the recovery relative to potential damages, and the quality of representation. Class counsel worked on a contingency basis, so their fees come only from the settlement fund if the court approves them.
For consumers, the automatic nature of the payments is a significant advantage. Many bank-fee settlements require claim forms and documentation. Here, the bank’s records served as the primary source of eligibility, reducing barriers for people who may no longer have old statements.
Legal Implications and Consumer Rights
The Flagstar ATM Fee Lawsuit fits into a larger pattern of banking litigation over non-sufficient funds fees, retry fees, and related charges. Courts have reached mixed results in similar cases. Some judges find that clear account agreements allow multiple fees on re-presented items. Others conclude that the language is ambiguous or that the practice violates the covenant of good faith and fair dealing.
New York General Business Law § 349 prohibits deceptive acts or practices in the conduct of business. Plaintiffs used this statute to argue that the fee practices misled ordinary consumers. Settlements like this one do not create binding precedent, but they signal that banks face real financial and reputational costs when fee structures draw scrutiny.
Consumers have several practical takeaways:
- Review your monthly statements carefully for repeated fees on the same underlying transaction.
- Understand the difference between an NSF fee (charged when an item is returned unpaid) and an overdraft fee (charged when the bank pays the item and creates a negative balance).
- Know that balance inquiries at out-of-network ATMs can sometimes trigger separate fees depending on the bank’s policy and network rules.
- Keep copies of account agreements and fee schedules. These documents often control the outcome of disputes.
Federal regulators, including the Consumer Financial Protection Bureau, have also examined overdraft and NSF practices in recent years. While this settlement arises under state law and contract principles, it contributes to the ongoing conversation about transparency in banking fees.
If you believe you were charged improper fees outside the class periods or by a different institution, you may still have individual options. These can include contacting the bank’s customer service, filing a complaint with state or federal regulators, or consulting a consumer attorney. Class settlements release claims related to the specific fees and periods covered. They do not prevent you from raising unrelated issues.
Practical Steps for Eligible Class Members
Because the settlement is final and payments are automatic, most eligible people need only wait for the credit or check. Still, a few steps can help:
- Check your current Flagstar account for a credit if you remain a customer.
- Watch your mail for a check if you closed the account. Update your address with the settlement administrator if you have moved.
- Visit the official settlement website (nycbsettlement.com) for contact information if you have questions about your eligibility or payment status.
- Keep records of any payment you receive for tax or personal tracking purposes. Settlement payments of this type are generally not taxable as income in the same way as wages, but individual circumstances vary.
- If a check arrives and expires before you cash it, contact the administrator promptly. Uncashed checks sometimes lead to residual distributions or escheatment to the state under unclaimed property laws.
Avoid third-party websites that ask for personal information or fees to “claim” your share. Legitimate settlements of this type do not require payment to receive benefits.
Broader Context of Banking Fee Litigation
Cases involving ACH check transactions, retry fees, and ATM charges have become common. Banks generate significant revenue from these fees, and consumers often feel the cumulative effect most acutely when balances are already low. Settlements provide partial recovery and sometimes prompt changes in fee practices or clearer disclosures.
Related issues include data privacy settlements involving the same institutions and ongoing debates about overdraft reform. Consumers who follow these developments can better protect themselves by choosing accounts with transparent fee structures, monitoring transactions closely, and understanding their rights under state consumer protection laws.
The Flagstar ATM Fee Lawsuit illustrates both the power and the limits of class actions. A relatively modest $1.23 million fund will not make any individual wealthy. It does, however, return money to people who paid disputed charges and reinforces the principle that banks must follow their own agreements and applicable law when assessing fees.
Conclusion
The Flagstar ATM Fee Lawsuit settlement offers automatic relief to checking account holders charged certain retry NSF or overdraft fees between 2017 and 2020, and to those assessed multiple out-of-network ATM fees after balance inquiries between 2020 and 2024. Eligibility rests on the bank’s records. Payments take the form of account credits for current customers and mailed checks for former ones.
Key takeaways include the two distinct classes, the proportional nature of most payouts, the automatic distribution process, and the final court approval in February 2026. Understanding these details helps consumers know what to expect and how to follow up if needed.
If you believe you may qualify or have questions about related bank fees, review the official settlement materials or consult a qualified consumer attorney. Staying informed about your rights remains the strongest protection against unexpected charges.
Frequently Asked Questions
Do I need to file a claim to receive money from the Flagstar ATM Fee Lawsuit settlement?
No. Eligible class members identified through bank records receive payments automatically as long as they did not opt out by the December 15, 2025, deadline.
How much will I receive?
Amounts vary. Multiple Fees Class members get a proportional share based on the number of qualifying fees they paid. OON Fees Class members receive payments calculated on a per-fee basis. Exact figures depend on the final net settlement fund and the total number of eligible fees.
I closed my New York Community Bank account years ago. Can I still get paid?
Yes. Former account holders who qualify receive a check mailed to the last address on file with the bank.
What if I never received a notice?
Contact the settlement administrator through the official website (nycbsettlement.com) to inquire about your status. Bank records control eligibility.
Has the settlement been finally approved?
Yes. The court granted final approval and entered judgment on February 20, 2026.
Are the settlement payments taxable?
Most consumer fee refunds of this type are not treated as taxable income, but you should consult a tax professional about your specific situation.
Can I still sue the bank individually over these fees?
If you remained in the class and did not opt out, the settlement releases the claims covered by the lawsuit. You generally cannot pursue separate litigation on the same issues.
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