NEW YORK — Navy Federal Credit Union will not be required to refund $80 million to military service members after a recent decision by the Consumer Financial Protection Bureau (CFPB). Under the leadership of President Donald Trump, the bureau dismissed the case, marking a shift in regulatory practices that affects compensation for alleged financial misconduct.
The case revolves around what are known as “authorized positive overdraft fees.” These fees occur when a financial institution approves a debit card transaction but later imposes an overdraft charge when the transaction settles, often resulting in insufficient funds. Investigations found that Navy Federal charged these fees from 2017 until 2022 and ceased the practice following scrutiny. The credit union did issue some refunds to customers affected by the charges.
Initially, Navy Federal would have faced significant financial penalties including a $15 million fine and the restitution of $80 million. The credit union has maintained that it fully cooperated with investigations and adhered to legal standards throughout the process.
The CFPB’s rationale for retracting its prior settlement remains largely unexplained. Under the interim direction of Russell Vought, who also serves as the president’s budget director, the agency has rescinded several previous consent orders, signaling a shift in its focus and operational consistencies. The agency’s withdrawal of this particular order includes an acknowledgment that Navy Federal consented to the decision.
In a defense of its overdraft practices, Navy Federal released a statement emphasizing its commitment to members. The organization argued that its procedures provide essential support for members making everyday purchases, steering them away from high-interest debt solutions like payday loans. Navy Federal underscored its compliance with laws governing financial transactions, asserting that the CFPB’s resolution was justifiable.
As the largest credit union in the U.S. with approximately 14 million members and assets totaling $180 billion, Navy Federal is a significant player in the financial landscape. Its size ranks it as the 24th largest bank in the nation if classified as such, underscoring its impact on the industry. While Vought has narrowed the CFPB’s mission, the bureau has previously indicated that it will continue to prioritize the financial welfare of military personnel.
Despite requests for comment, the CFPB has not responded. This case reflects broader changes within the agency and raises questions about the oversight of financial institutions and their practices, especially regarding vulnerable consumers like service members.