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Tag: civil penalty

Navy Federal ordered to refund customers $80M, pay $15M civil penalty

The Consumer Financial Protection Bureau is ordering Navy Federal Credit Union to refund more than $80 million to customers and pay a $15 million civil penalty for allegedly charging illegal overdraft fees.

CFPB announced the actions against the nation’s largest credit union on Thursday. CFPB alleges that from 2017 to 2022, Vienna-based Navy Federal charged customers surprise overdraft fees on certain ATM withdrawals and debit card purchases, despite their accounts showing sufficient funds at the transaction times.

The $15 million civil penalty will go to CFPB’s victims relief fund, called the Civil Penalty Fund. According to a CFPB news release, the penalty is the largest that CFPB has levied against a credit union for illegal overdraft fees.

“Navy Federal fully cooperated with the CFPB’s investigation and we will continue to comply with all applicable laws and regulations, just as we always have and as we believe we did here,” The credit union said in a statement. “Nevertheless, this settlement enables us to focus on serving our members and their families. As a member-owned, not-for-profit credit union, we are focused on putting our members first.”

Additionally, the credit union stated, “over the past several years, Navy Federal has continued to comply with evolving expectations — including by automatically refunding certain overdraft fees since January 2023.” It will also eliminate “nonsufficient fund fees” for personal checking accounts in the first quarter of 2025, a reform it announced in October.

As of Sept. 30, Navy Federal had $180 billion in assets. The credit union has 360 branches, more than 14 million members and about 24,000 employees.

“Navy Federal illegally harvested tens of millions of dollars in junk fees, including from active-duty service members and veterans,” CFPB Director Rohit Chopra said in a statement. “The CFPB’s work to rid the market of illegal junk fees has saved American families billions of dollars.”

The CFPB said in a news release it found that Navy Federal violated the Consumer Financial Protection Act through charging surprise overdraft fees on purchases made with sufficient funds in consumers’ accounts at the transaction times and by charging overdraft fees resulting from delayed peer-to-peer payments that had undisclosed processing times.

Through its Optional Overdraft Protection Service, Navy Federal charged consumers $20 for most overdraft transactions and collected nearly $1 billion in overdraft fees from 2017 to 2021, according to the CFPB.

According to the CFPB, Navy Federal charged customers overdraft fees if a customer’s account had a negative balance once a transaction posted, although the account had had enough money to cover the transaction when the consumer made it. The credit union collected an average of $44 million annually in these fees, the CFPB alleges.

Navy Federal, the CFPB alleges, also charged overdraft fees when customers tried to use funds from payment services like Zelle, PayPal and Cash App that showed in Navy Federal systems as immediately available to spend but were still processing. The credit union did not disclose that payments received after 10 a.m. Eastern time initially, and later after 8 p.m. EST, wouldn’t post until the next business day. Navy Federal collected at least $4 million from these fines, according to the CFPB.

“We will continue to support and invest in our members — including the military, veterans and their families — to help them meet their financial goals,” Navy Federal said in a statement.

Maximus fined by SEC for proxy, reporting violations

Tysons-based federal technology contractor Maximus will pay $500,000 in civil penalties to settle a charge that it failed to disclose it had employed the siblings of one of its executive officers.

According to a settlement announced by the U.S. Securities and Exchange Commission Monday, Maximus appointed a business segment leader and longtime employee as an executive officer effective Oct. 1, 2019. That person, who is unnamed in the administrative proceeding, also had two siblings that were longtime employees — also unnamed — and each received an annual compensation of $120,000 or more, amounts in excess of SEC disclosure regulations. Maximus failed to disclose the relationship on annual reports in fiscal years 2019 through 2021 as well as in proxy statements filed from January 2020 through January 2022. Maximus was required to report the relationship on forms because of the siblings’ direct or indirect material interest in the transactions, according to the filing.

Maximus did not admit or deny the allegations made by the SEC and cooperated with the SEC’s investigation.

In an emailed statement to Virginia Business, company spokesperson Eileen Cassidy Rivera said Maximus is “pleased we were able to resolve this matter on an amicable basis with the SEC.”

Maximus was one of 36 Virginia companies to make the 2023 Fortune 1000 list, placing at No. 679. The company has more than 50,000 employees worldwide and runs Medicare and Affordable Care Act customer help lines.