A South Florida woman is seeking class action certification of her lawsuit accusing a New York bank of transferring $51,000 from her matured certificate of deposit into a new “zombie CD” paying 0.02% interest for 25 years, violating the terms of its deposit agreement.
Tunny Solomon, a Miami Beach resident, opened the 14-month CD in October 2018 at a New York Community Bank branch in Dade County, Fla., with $50,000 and a rate of 2.65%, according to her federal lawsuit.
NY Community Bank rebranded in October as Flagstar Bank, which it acquired in late 2022 to become a national banking association. Its parent is Flagstar Financial, based in Hicksville, N.Y.
Solomon’s new CD was opened without consent and without quarterly statements notifying a customer of the changes, said her lawyer, Seth Lehrman of Lehrman Law in Boca Raton, Fla.
Two Flagstar spokesmen and the bank’s attorney of Troutman Pepper Locke did not respond to messages seeking comment. A response to the suit is due in March, according to court filings. The complaint alleges breach of contract, breach of good faith and fair dealing and unjust enrichment.
“As a result of Defendant’s duplicitous business practices, Plaintiff was deprived of the interest she would have earned on the funds the bank surreptitiously and without authorization, rolled into a new zombie, negligible-interest CD rather than an interest-bearing maturity savings account,” according to Solomon’s complaint, filed in November in the Southern District of Florida.
Solomon suffered financial losses “exceeding thousands of dollars while further depriving her of any additional use of the funds from which she could have potentially benefited,” the suit claims.
Solomon’s CD matured on Dec. 25, 2019, and her funds were to be placed into an interest-bearing savings account if the CD account was not renewed, according to the complaint.
“Instead, in violation of the CD Agreement, Defendant surreptitiously transferred the funds to CD account, bearing the same account number as the original CD Account, with a de minimis interest rate, which upon information and belief, was the minimum rate required to qualify the CD account as a CD for entry into Defendant’s system,” according to the lawsuit.
Lehrman declined to comment Tuesday on any communications between the bank and Solomon. The $51,552.50 from her original CD remain in the “zombie CD,” he said.
Lehrman said he is seeking other plaintiffs who may have had a similar experience with the bank regarding a CD account. Flagstar is a commercial lender focused primarily on the residential real estate market in New York City.
“Based on our research, our understanding is this was a systemic practice at Flagstar Bank and its predecessors, particularly New York Community Bank,” Lehrman said. He said he has “reason to believe there were many other people like Ms. Solomon,” but declined to comment “with respect to what the practices are of other banks.”
“We’re certainly interested in speaking to any consumers who have had this experience with this bank or other banks,” Lehrman said.
Flagstar Financial had total assets of $100.2 billion at the end of 2024. Reporting its fourth quarter 2024 results on Thursday, the bank said its CD balance rose 27% to $27.3 billion compared to the same period in 2023.
Flagstar received $1.05 billion in capital in March 2024 from Liberty Strategic Capital, led by former Treasury Secretary Steven Mnuchin. The company foundered early last year after disclosing a $252 million loss from commercial real estate exposure and cut its quarterly dividend by 70%.
