Tuesday, October 11, 2016

CFPB Fines Navy FCU $28.5 Million for Improper Debt Collection Practices

The Consumer Financial Protection Bureau (CFPB) took action against Navy Federal Credit Union (Vienna, VA) for making false threats about debt collection to its members, which included active-duty military, retired servicemembers, and their families.

The CFPB found that Navy Federal Credit Union deceived consumers to get them to pay delinquent accounts. The credit union falsely threatened severe actions when, in fact, it seldom took such actions or did not have authorization to take them. The credit union also cut off members’ electronic access to their accounts and bank cards if they did not pay overdue loans.

The CFPB found that hundreds of thousands of consumers were affected by these practices, which occurred between January 2013 and July 2015.

Navy Federal Credit Union will pay roughly $23 million in redress to victims along with a civil money penalty of $5.5 million.

In addition, the credit union must create a comprehensive plan to address how it communicates with its members about overdue debt. This includes refraining from any misleading, false, or unsubstantiated threats to contact a consumer’s commanding officer, threats to initiate legal action, or misrepresentations about the credit consequences of falling behind on a Navy Federal Credit Union loan.

Furthermore, Navy Federal Credit Union cannot block its members from accessing all their accounts if they are delinquent on one or more accounts. The credit union must implement proper procedures for electronic account restrictions.

Read the enforcement order.

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