Escambia County’s largest employer, Navy Federal Credit Union, has been ordered by the Consumer Financial Protection Bureau (CFPB) to refund more than $80 million to consumers, stop charging illegal overdraft fees, and pay a $15 million civil penalty to the CFPB’s victims relief fund.
- According to CFPB, through its “Optional Overdraft Protection Service,” known as “OOPS,” Navy Federal charged consumers $20 for most overdraft transactions. The credit union collected nearly $1 billion in overdraft fees from 2017 to 2021.
Navy Federal responded with a statement on its website.
- Identifying itself as a “member-owned, not-for-profit credit union,” Navy Federal stated it had reached an agreement with the Consumer Financial Protection Bureau concerning overdraft fees assessed to personal checking accounts (accounts of military service members, veterans and their families) and would a $15 million fine to the CFPB as part of the agreement. The refunds were mentioned later in the statement: “Over the past several years, Navy Federal has continued to comply with evolving expectations – including by automatically refunding certain overdraft fees since January 2023.”
DIG DEEPER: This is not the first time the CFPB has fined Navy Federal for illegally taking advantage of its members. In 2016, the CFPB took action against Navy Federal Credit Union for making false threats about debt collection to its members, who include active-duty military, retired service members, and their families. The credit union also unfairly restricted account access when members had a delinquent loan.
Navy Federal Credit Union was ordered to pay victims roughly $23 million in redress and a civil penalty of $5.5 million.
Hundreds of thousands of consumers were affected by these practices, which occurred between January 2013 and July 2015. The practices violated the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, the CFPB found that Navy Federal :
Falsely threatened legal action and wage garnishment: The credit union sent letters to members threatening to take legal action unless they made a payment. But in reality, it seldom took any such actions. The CFPB found that the credit union’s message to consumers of “pay or be sued” was inaccurate about 97 percent of the time, even among consumers who did not make a payment in response to the letters. The credit union’s representatives also called members with similar verbal threats of legal action. And the credit union threatened to garnish wages when it had no intention or authority to do so.
Falsely threatened to contact commanding officers to pressure servicemembers to repay: The credit union sent letters to dozens of servicemembers threatening that the credit union would contact their commanding officers if they did not promptly make a payment. The credit union’s representatives also communicated these threats by telephone. For members of the military, consumer credit problems can result in disciplinary proceedings or lead to revocation of a security clearance. The credit union was not authorized and did not intend to contact the servicemembers’ chains of command about the debts it was attempting to collect.
Misrepresented credit consequences of falling behind on a loan: The credit union sent about 68,000 letters to members misrepresenting the credit consequences of falling behind on a Navy Federal Credit Union loan. Many of the letters said that consumers would find it “difficult, if not impossible” to obtain additional credit because they were behind on their loan. But the credit union had no basis for that claim, as it did not review consumer credit files before sending the letters. The credit union also misrepresented its influence on a consumer’s credit rating, implying that it could raise or lower the rating or affect a consumer’s access to credit. As a furnisher, the credit union could supply information to the credit reporting companies but it could not determine a consumer’s credit score.
Illegally froze members’ access to their accounts: The credit union froze electronic account access and disabled electronic services for about 700,000 accounts after consumers became delinquent on a Navy Federal Credit Union credit product. This meant delinquency on a loan could shut down a consumer’s debit card, ATM, and online access to the consumer’s checking account. The only account actions consumers could take online would be to make payments on delinquent or overdrawn accounts.