USAA disputes the allegations in the class action suit. (Credit: Karen Roach/Adobe Stock)
USAA has agreed to settle a proposed class action lawsuit concerning controversial policyholder late fees for $5 million.
Plaintiffs in the suit allege that the insurer collected $8.1 million in late fees from around 127,000 Maryland policyholders between 2011 and 2019 that violate the state’s insurance code. While USAA refunded around $7.3 million of these late fees, the lawsuit alleges the company pocketed the interest earned on those funds.
The suit claims that these refunds — issued in 2020 — were “devoid of any disclosure that such charge was the result of illegal activity by (USAA) or the investigation by the MIA,” and that USAA “did not have a legal or equitable basis” to retain the financial gains from these fees.
The proposed class action was originally filed in a Maryland federal court in 2021. In March 2025, an amended suit was filed, stating the complaint involved more than 100 individuals and over $5 million in damages. The plaintiffs claim that before June 27, 2011, Maryland’s insurance commissioner allowed USAA to charge a $10 penalty when customers’ payments were late. However, on June 27, 2011, USAA reportedly withdrew its fee plans.
The suit argues that this backtracking by USAA meant the insurer withdrew its authority to charge or collect late fees, though it continued to collect these penalties from customers for about eight years. A 2020 consent order between USAA and the state insurance commissioner said that the company had “inadvertently” removed the late fee.
A consumer complaint to the Maryland Insurance Administration in 2018 regarding a policy termination led to an investigation into USAA's collection of late fees. The plaintiff’s lawsuit stated that the findings of this investigation determined USAA’s filings did not seek or receive authorization to continue charging late fees. USAA was eventually required to pay a $67,500 administrative penalty as part of a consent order in 2020.
Despite agreeing to the settlement, USAA disputes the allegations in the class action suit.
“USAA believes we followed state law and our insurance policies and had properly reimbursed our impacted members,” a company spokesperson said in statement. “In this case, settlement is in the best interest of our membership and allows USAA to avoid lengthy and expensive litigation and focus on providing exceptional service.”
The $5 million settlement includes up to $2 million in attorney fees and costs, and currently awaits approval from a judge.
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