CFPB Takes Action Against Navy Federal Credit Union for Debt Collection Violations

October 13, 2016

On Wednesday, October 13, 2016, the CFPB entered into a consent order with Navy Federal Credit Union for a number of unfair, deceptive, abusive acts or practices (UDAAP) violations between January of 2013 and July of 2015 related to its in-house collection practices. The Bureau alleges Navy Federal contacted hundreds of thousands of consumers by letter or phone expressly or impliedly threatening to take legal action on their delinquent accounts. However, the credit union only filed 5,000 debt collection lawsuits during this period. Therefore, the CFPB determined Navy Federal’s threats to sue were deceptive as they lacked intent to sue. For example, the Bureau states the credit union’s “process for evaluating accounts for potential legal action was not sufficiently connected to or coordinated with the separate process for determining when to send letters to consumers threating legal action.”

 

The CFPB also alleged Navy Federal deceptively threatened to contact some consumer’s/servicemember’s commanding officers about their delinquent account when it lacked effective borrower consent to do so. Navy Federal was also charged with deceptively advising consumers they could improve their credit scores or ability to access credit without any basis to make such assertions.  Finally, the CFPB alleges Navy Federal had an unfair practice of freezing consumers’ ability to access their electronic accounts and disabling certain electronic services after they became delinquent. Navy Federal is required to pay $23 million in redress, as well as a $5.5 million civil money penalty and ensure delinquent consumers are able to access all of their accounts.