Navy Federal Credit Union Fined $28.5 Million Over Debt Collection Issues
On Tuesday, the Consumer Financial Protection Bureau ordered the Navy Federal Credit Union to pay $28.5 million in fines and restitution to settle civil charges. Navy Federal had been accused of making “false threats” about debt collection to its customers.
The CFPB said the credit union, which primarily serves active-duty and retired military members, sent letters that threatened legal action and garnished wages if bills were not paid, but these threats were rarely carried out. The letters in question were sent from January 2013 through July 2015 to 193,000 customers, but the bank only filed 5,000 debt collection lawsuits.
Many of the letters contained false threats and said customers would “find it difficult, if not impossible, to obtain additional credit” because of their “unsatisfactory” credit rating. 115 customers even received a letter that threatened to contact the member’s commanding officers if delinquent payments were not made.
The CFPB also said the credit union attempted to “unfairly” restrict access to funds when a customer had a delinquent loan.
Most of the settlement, $23 million, will be returned to consumers who were harmed by the credit union’s alleged actions, and the remaining $5.5 million will be paid as a penalty.
Navy Federal, which is the largest credit union in the United States with more than $77.8 billion in assets, agreed to the settlement, but did not admit or deny wrongdoing. In a statement the credit union simply said it is “proud of its 83-year history” of helping members reach their financial goals.
“Where our collections practices have come up short in the Consumer Financial Protection Bureau’s estimation, we have made all the necessary changes. We have cooperated with the CFPB throughout the process,” the credit union added.