US Navy Federal Credit Union to pay $28.5 million over debt collection issues
WASHINGTON (Reuters) – U.S. consumer protection regulators on Tuesday ordered Navy Federal Credit Union to pay $28.5 million in restitution and fines to settle civil charges, alleging it uttered ” false threats” concerning the collection of debts against its members.
The Consumer Financial Protection Bureau also said the credit union, which serves many active and retired members of the military, decided to “unfairly” restrict access when its customers had delinquent loans.
The Navy Federal Credit Union, which settled the charges without admitting or denying wrongdoing, is the largest credit union in the United States with more than $77.8 billion in assets as of June 30.
In a statement, the Navy Federal Credit Union said it was “proud of its 83-year history” of helping its members achieve their financial goals.
“Where our collection practices have been insufficient according to the estimate of the Consumer Financial Protection Bureau, we have made all the necessary changes. We cooperated with the CFPB throughout the process,” the credit union added.
Of the $28.5 million to be paid in the settlement, the CFPB said $23 million will return to consumers who were harmed, while the remaining $5.5 million will be paid as a penalty.
According to the regulator, the credit union sent letters to some of its members threatening them with legal action if they did not pay – a threat that rarely materialized.
In some cases, the letters also threatened to garnish consumers’ wages, a remedy that is only available by court order.
From January 2013 to July 2015, the CFPB said such letters were sent to 193,000 customers, but at the same time it only filed 5,000 debt collection suits.
In one instance, the CFPB said, the Navy Federal Credit Union also sent letters to 115 consumers threatening to contact their military commanders about their failings.
In addition, the regulator said some of the debt collection letters also included false threats, such as claiming that customers “would find it difficult, if not impossible, to obtain additional credit” due to their “unsatisfactory credit rating.” with the credit union.
Reporting by Sarah N. Lynch; Editing by Chris Reese and Alan Crosby