US financial watchdog Consumer Financial Protection Bureau (CFPB) has ordered Navy Federal Credit Union to pay around $95m for charging illegal overdraft fees.
Navy Federal was ordered to refund more than $80m to consumers, stop charging illegal overdraft fees, and pay a $15m civil penalty to the CFPB’s victims relief fund.
According to CFPB, Navy Federal illegally charged its customers surprise overdraft fees on certain ATM withdrawals and debit card purchases, between 2017 and 2022.
Navy Federal said that it has fully cooperated with CFPB’s investigation and will continue to obey all applicable laws and regulations.
CFPB director Rohit Chopra said: “Navy Federal illegally harvested tens of millions of dollars in junk fees, including from active duty service members and veterans. The CFPB’s work to rid the market of illegal junk fees has saved American families billions of dollars.”
Navy Federal Credit Union in a statement said: “As a member-owned, not-for-profit credit union, we are focused on putting our members first.
“That means we prioritise doing right by our members and ensuring they have the resources, tools and support they need to build strong financial futures.
“We look forward to reinforcing this fact to our members every day through our values, policies and world-class customer service.”
Navy Federal is the largest credit union in the US, with headquarters in Vienna, Virginia.
It serves military members, veterans, civilian employees, and their families, with more than $171bn in assets and more than 13 million members, as of December last year.
Through its Optional Overdraft Protection Service (OOPS), Navy Federal charged its consumers $20 for overdraft transactions, collecting nearly $1bn between 2017 and 2021.
The members were illegally charged overdraft fees when they made purchases even when their accounts showed adequate money to cover the transaction.
The credit union also charged overdraft fees when the customer’s account had a negative balance once the purchase was posted to the account, after a few days in some cases.
When customers received money through payment services such as Zelle, PayPal, and Cash App, Navy Federal’s systems failed to disclose the payments immediately.
CFPB found that Navy Federal violated the Consumer Financial Protection Act by charging illegal, surprise overdraft fees on purchases made with sufficient funds.
