Navy Federal Credit Union, the largest credit union in the US, has been ordered by the Consumer Financial Protection Bureau (CFPB) to refund more than $80m to consumers for illegally charging overdraft fees.
The CFPB's enforcement action, which also includes a $15m civil penalty, marks the largest sum ever recovered from a credit union for illegal practices.
With headquarters in Vienna, Virginia, Navy Federal serves active duty military members, veterans, and Department of Defense civilian employees.
As of December 2023, it had over $171bn in assets and more than 13 million members. Navy Federal operates 355 branches, including locations on military installations and overseas bases.
From 2017 to 2022, Navy Federal's "Optional Overdraft Protection Service" (OOPS) imposed a $20 fee for most overdraft transactions. The credit union accrued nearly $1bn in overdraft fees over this period.
CFPB director Rohit Chopra said: "Navy Federal illegally harvested tens of millions of dollars in junk fees, including from active duty servicemembers and veterans.
"The CFPB's work to rid the market of illegal junk fees has saved American families billions of dollars."
Members faced these fees in two main ways: when their account balances appeared sufficient at the time of purchase but were later processed with a deficit, and when peer-to-peer payments posted later than the funds appeared available, leading to unexpected overdraft charges.
The CFPB's findings indicated that Navy Federal breached the Consumer Financial Protection Act by charging these surprise fees and failing to disclose the actual posting times for peer-to-peer payments. This practice resulted in at least $4m in fees from services like Zelle, PayPal, and Cash App.
The CFPB's order mandates that Navy Federal cease charging the identified illegal overdraft fees and requires the credit union to pay the substantial civil penalty into the CFPB's victims relief fund.
This action aligns with the CFPB's broader initiative to target unfair and deceptive financial practices, particularly concerning overdraft fees, which have been under scrutiny for their legality and impact on consumers.
"Navy Federal Credit Union fined $95m over illegal overdraft charges" was originally created and published by Retail Banker International, a GlobalData owned brand.