RSSThe Consumer Financial Protection Bureau recently fined Navy Federal Credit Union $95 million for charging illegal overdraft fees.
According to the CFPB, Navy Federal charged customers surprise overdraft expenses on ATM withdrawals and debit card purchases from 2017-22 through its optional overdraft protection service, even when the accounts had enough funds at the time of the transactions. The credit union collected nearly $1 billion in overdraft fees from 2017-21.
Members were allegedly illegally charged overdraft fees in two ways: First, Navy Federal allegedly charged customers overdraft fees when their account had a negative balance once the purchase was posted to the account, not when they made the purchase.
Also, when customers received money through payments services such as PayPal, Cash App and Zelle, Navy Federal’s systems indicated the money could be spent immediately. According to the CFPB, the credit union failed to mention payments not received between 10 a.m.-8 p.m. EST wouldn’t be posted until the next business day. Customers who tried to use the money when it was posted the following business day were subsequently charged overdraft fees.
The CFPB ordered Navy Federal to refund more than $80 million to consumers, stop charging illegal overdraft fees and pay a $15 million civil penalty to the bureau’s victims relief fund. The fine is the largest the CFPB has obtained from a credit union for illegal activity. The credit union was also banned from charging overdraft fees caused by insufficient funds at the time of processing if there were sufficient funds at the time of the transaction, or overdraft fees from the delayed posting of funds from peer-to-peer payment networks.
The largest credit union in the United States, Navy Federal Credit Union is headquartered in Vienna, Va. As of last December, the credit union had $171 billion in assets and more than 13 million members.
“Navy Federal illegally harvested tens of millions of dollars in junk fees, including from active duty servicemembers and veterans,” said CFPB Director Rohit Chopra. “The CFPB’s work to rid the market of illegal junk fees has saved American families billions of dollars.”
