The Consumer Financial Protection Bureau (CFPB) has charged the US’s largest credit union for unlawfully imposing overdraft fees on its users.
The CFPB has prohibited Navy Federal Credit Union from further charging these unexpected fees and has mandated the refund of over $80 million to affected customers, alongside a $15 million civil penalty to the CFPB’s victims relief fund.
From 2017 to 2022, Navy Federal was found to be illegally collecting $20 from consumers for overdraft transactions through its Optional Overdraft Protection Service (OOPS). Surprise fees were charged even when customers had sufficient funds for the transaction, as long as their account displayed a negative balance after the purchase was processed. The credit union generated $44 million annually from OOPS.
Additionally, overdraft fees were imposed when users received funds via Zelle, PayPal, Cash App, or other payment applications. Although these transactions appeared to show that funds were available immediately, they would not actually post until the next business day, leading to overdraft fees if customers made purchases before the funds were officially deposited. Navy Federal earned $4 million in fees through this practice.
CFPB Director Rohit Chopra remarked, “Navy Federal illegally harvested tens of millions of dollars in junk fees, including from active-duty servicemembers and veterans. The CFPB’s efforts to eliminate illegal junk fees have saved American families billions of dollars.”