Navy Federal Credit Union has been fined $28.5 million for improper debt collection methods, including making false threats and unfair restrictions on account access, the Consumer Financial Protection Bureau said.
“Navy Federal Credit Union misled its members about its debt collection practices and froze consumers out from their own accounts,” CFPB Director Richard Cordray said in a statement. “Financial institutions have a right to collect money that is due to them, but they must comply with federal laws as they do so.”
The CFPB said that the Navy FCU, whose members include include active-duty military, retired service members, and their families, violated the Dodd-Frank Wall Street Reform and Consumer Protection Act with their debt collection practices, Banker and Tradesman noted.
The credit union made false threats of legal action and wage garnishment, telling customers that they would contact delinquent members’ commanding officers, according to the CFPB. Navy FCU also is accused of illegally stopping access to about 700,000 accounts when consumers were late with their payments.
“The credit union also gave members with delinquent loans misleading information on the consequences to their credit, inflating the credit union’s influence on their credit ratings,” Mortgage News Daily reported, citing the CFPB.
The $28.5 million penalty consists of $23 million to be paid to victims and $5.5 million in a civil money penalty. The credit union also must develop a comprehensive plan to address its debt collection practices and ensure account access.
The credit union had $73 billion in assets as of December and is the largest in the U.S.
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