The Consumer Federation of America released the following statement in response to today’s decision by the Consumer Financial Protection Bureau (CFPB) to withdraw the 2024 consent order filed against Navy Federal Credit Union (NFCU) for charging illegal surprise overdraft fees.
“The CFPB cannot reverse this consent order and simultaneously claim that it is prioritizing the interests of servicemembers,” said Adam Rust, director of financial services for the Consumer Federation of America. “They have literally stolen millions of dollars meant to compensate servicemembers, their families, and employees of the Department of Defense for Navy Federal’s illegal overdraft practices.”
CFA calls on the CFPB and Navy Federal to report how much of the $80.6 million in restitution remains unpaid.
About the Navy Federal Credit Union consent order
Navy Federal Credit Union collected more than $235 million in overdraft fees per year, a sum greater than all but a handful of the nation’s largest financial institutions. Its field of membership consists of active-duty military, veterans, Department of Defense employees, and their families.
In 2024, under the leadership of former Director Rohit Chopra, the CFPB issued a consent order against NFCU, requiring it to pay $95 million, including $80.6 million in direct compensation to consumers and $15 million to the CFPB’s victim’s relief fund, and to stop charging illegal overdraft fees.
NFCU’s policies for posting deposits permitted it to trigger more overdraft fees. Due to how NFCU reported account balances to customers, some people received “authorize positive, settle negative” (APSN) fees. APSN fees can occur when an account’s available balance indicates it can cover an expense, but due to the sequence of how debits and credits are posted at the end of the day, the account holder is charged a fee at a later time. In practice, if a person checked their balance at the register and saw there were funds to cover the transaction, they could still end up paying one or more overdraft fees because of subsequent payments. APSN fees made up twenty percent of all overdrafts charged by NFCU.
It applied a similar method for posting of incoming peer-to-peer (P2) payments. When an account holder checked their balance, the funds received would be described as available, even though the deposits were not always posted until the end of the next business day. When account holders spent unposted funds, they were charged overdraft fees.
Recent CFPB actions affecting servicemembers
On occasions when the new CFPB has announced plans to withdraw its supervisory or enforcement work in a market (e.g. BNPL, payday lending, Section 1071 small business lending), it has used boilerplate language to state its new policy priorities. “The Bureau takes this step in the interest of focusing resources on supporting hard-working American taxpayers, servicemen, veterans, and small businesses.”
In May, the CFPB withdrew its supervision of the Military Lending Act.