Navy Federal Credit Union Ordered by CFPB to Pay $95 Million for Surprise Overdraft Fees

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The Consumer Financial Protection Bureau (CFPB) has ordered Navy Federal Credit Union to pay more than $95 million after determining that the nation’s largest credit union illegally collected from members millions in surprise overdraft fees from 2017 to 2022.

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According to a November 7 press release from the CFPB, Navy Federal charged consumers $20 overdraft fees for certain ATM withdrawals and debit card purchases, even when their accounts appeared to have sufficient funds at the time these transactions were authorized.

The CFPB has ordered Navy Federal to pay more than $80 million in customer refunds. The credit union has also been banned from imposing the so-called junk fees at issue and must contribute a $15 million civil penalty to the CFPB’s victims relief fund, which is used to compensate consumers harmed by companies that violate consumer financial protection laws. 

The CFPB found that Navy Federal, which primarily serves military members, veterans, Department of Defense civilian employees and their families, assessed unanticipated and illegal overdraft fees through two specific practices.

In the first instance, a member’s account would show sufficient funds when they made a purchase. However, the CFPB said, Navy Federal would later charge the member an overdraft fee if their account showed a negative balance once the transaction was processed, sometimes days or even weeks afterward.

Per the CFPB, Navy Federal collected an average of $44 million each year imposing this type of overdraft fee.

The press release goes on to say that the credit union collected at least $4 million in overdraft fees caused by delayed peer-to-peer payments with undisclosed processing times. In these instances, a consumer would receive payments through services like Zelle, PayPal or Cash App that appeared as immediately available to spend, the CFPB said.

“However, the credit union failed to disclose that payments received after 10:00 am Eastern (and later, after 8:00 pm Eastern) wouldn't actually post until the next business day,” the press release states. “Some customers who tried to use this money were then charged overdraft fees.”

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