Consent Order Against Navy Could Sink Long Standing CU Rights

October 13, 2016 at 9:13 am 7 comments

On Tuesday the CFPB announced an enforcement order against Navy Federal Credit Union for engaging in unfair and Deceptive collection practices against delinquent  members whose accounts were delinquent.  One of the violations cited by the Bureau raises questions about one of the most fundamental precepts of credit union law: The right to restrict services to members who have caused a loss.

According to the Bureau, Navy engaged in Unfair and Deceptive Practices by denying electronic account access and services for about 700,000 accounts after members  became delinquent on a Navy Federal Credit Union credit product. As explained in the press release “ This meant delinquency on a loan could shut down a consumer’s debit card, ATM, and online access to the consumer’s checking account. The only account actions consumers could take online would be to make payments on delinquent or overdrawn accounts.”

To be clear, this practice was just one of a group of hardball collection practices some of which, if true, violated the Fair Debt Collections Practices Act. But the CFPB’s finding on Navy’s account practices is hard to square with one of the bedrock rules of credit union land.  As the NCUA has explained in opinion letters over the years . “Long standing legal interpretation is that an FCU may limit services to a member who has caused a loss” so long as the member retains the right to vote at the annual meeting and maintain a share draft account.

Against this backdrop, If a member has caused Navy a loss then how is it unfair and deceptive to limit his use of electronic account services?  Before yesterday I would have told you that electronic services are a privilege of membership, not a right.

If this is no longer the case then NCUA should put credit unions on notice of this fundamental policy shift. If the law hasn’t changed then NCUA should consult with the Bureau and explain how Navy’s actions are distinguishable from what other credit unions do and why. We need guidance…quickly.

Entry filed under: Compliance. Tags: .

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7 Comments Add your own

  • 1. William Feldman  |  October 13, 2016 at 12:36 pm

    However, a delinquency is not a charge-off or a loss. This was happening within 30 days of the delinquency, well before charge-off.

  • 3. yikes  |  October 20, 2016 at 2:18 pm

    It makes you want to take your marbles and go home sometimes.

  • 4. Christian Mulvey  |  October 21, 2016 at 9:36 am

    If they are delinquent, they have breached their contract (to pay) and as such, I believe it is our right to reduce our loss by limiting their services (which are often granted at no cost to the member/expense for CU).

  • 5. Julie  |  October 21, 2016 at 9:59 am

    Actually, any member that has caused a loss will still have the right to vote and maintain a share account, not a share draft account.

  • 6. Violet  |  October 21, 2016 at 10:24 am

    Just another way that the government interferes. If they keep up, credit unions will be regulated out of business

  • […] bottom line is this: the CFPB has not only been an incredibly aggressive regulator but is also an aggressive enforcer of consumer protection laws as it feels they should be interpreted. Again, for those of us who […]


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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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