Washington DC – Today, the Consumer Financial Protection Bureau (CFPB) took action against Navy Federal Credit Union for charging illegal overdraft fees. From 2017 to 2022, Federal Navy charged customers unexpected overdraft fees for certain ATM withdrawals and debit card purchases, even if there was sufficient funds in the account at the time of the transaction. The CFPB has ordered Navy Federal to refund more than $80 million to consumers, stop collecting illegal overdraft fees, and pay a $15 million civil penalty to the CFPB's Victim Relief Fund. This is the largest amount the CFPB has ever obtained from a credit union for illegal conduct.
“The federal Navy illegally collected tens of millions of dollars in junk fees from active duty military, veterans, and others,” said CFPB Director Rohit Chopra. “The CFPB’s efforts to remove illegal junk fees from the market have saved American families billions of dollars.”
Navy Federal Credit Union is the largest credit union in the United States, headquartered in Vienna, Virginia. The credit union serves active duty military, veterans, Department of Defense civilians and their families. As of December 2023, Navy Federal Command has over $171 billion in assets and more than 13 million members. Navy Bundeswehr has 355 branches around the world, of which 175 branches are located on or near military installations and 26 branches are located on military bases overseas.
Oops
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.
Members were illegally charged overdraft fees in two ways. First, when you make a purchase by showing enough money in your account to cover the transaction, and once the purchase is posted to your account, sometimes after a few days, your account balance goes negative, your credit union will still charge you for overdrafts. They were charging a fee. The Federal Navy collected an average of $44 million annually in these surprise fees. As early as 2015, federal regulators, including the CFPB and the Federal Reserve, began warning financial institutions against charging these unexpected overdraft fees.
Second, when a customer received money through a payment service like Zelle, PayPal, or Cash App, the Navy Federal system showed the money as ready to spend. However, the credit union failed to clarify that payments received after 10 a.m. ET (after 8 p.m. ET) are not actually posted until the next business day. Some customers who tried to use this money were charged overdraft fees. Through this practice, the Federal Navy collected at least $4 million in fees.
The CFPB found that Navy Federal violated the Consumer Financial Protection Act by:
- Charging illegal unexpected overdraft fees for purchases made with sufficient funds: Navy Federal charged a fee to consumers who had sufficient funds in their account at the time of the purchase, but only later when the transaction was processed.
- Charges for overdraft fees due to peer-to-peer payment delays due to undisclosed processing times: The credit union indicated that deposits from services such as Zelle, PayPal, and Cash App are available, but clarified that payments received after a certain cut-off time will not be posted until the next business day. and still charges overdraft fees to some customers. We tried to use these apparently available funds.
enforcement measures
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions that violate the Consumer Financial Protection Act, including unfair, deceptive, or abusive acts or practices.
CFPB orders:
- Obtained over $80 million in consumer relief: Navy Federal must refund overdraft fees improperly charged to affected consumers.
- Completely prohibits the Federal Navy from charging certain overdraft fees: Credit unions are subject to overdraft fees and delays in posting funds received through peer-to-peer payment networks due to insufficient funds at the time of processing, even though there were sufficient funds at the time the transaction was made. You can no longer charge overdraft fees due to .
- Requires Federal Navy to pay $15 million fine: The federal Navy will pay a $15 million civil penalty to the CFPB's Victim Relief Fund.
The CFPB has made overdraft fees a priority in its fight against illegal junk fees. In January 2024, the CFPB proposed rules that would treat overdraft loans like credit cards and limit overdraft fees to established thresholds. In December 2023, the CFPB released a report stating that many Americans were surprised by these overdraft fees and most were not expecting to receive them. The CFPB also issued a notice in 2022 stating that unexpected overdraft fees are likely illegal.
Read today's order.
Consumers can file complaints about financial products and services by visiting the CFPB's website or by calling (855) 411-CFPB (2372).
Employees who believe their company is violating the Federal Consumer Financial Protection Act are encouraged to send information they know to whistlebwer@cfpb.gov. For more information about reporting potential industry misconduct, please visit the CFPB website.
The Consumer Financial Protection Bureau is a 21st century agency that enforces and enforces federal consumer financial laws and ensures that the markets for consumer financial products are fair, transparent, and competitive. For more information, please visit: www.consumerfinance.gov.
