Skip to main content

Michael Lozoff PA Speaks to Important Lessons from the CFPB-Navy Federal Consent Decree

Important Lessons from the CFPB-Navy Federal Consent Decree

On October 11, 2016, the CFPB issued a consent order citing Navy Federal Credit Union for unfair and deceptive debt collection practices. Navy Federal was ordered to pay a $5.5 million civil penalty and to pay affected members $23 million. The CFPB found that the $77 billion Navy Federal violated the Consumer Financial Protection Act of 2010 (the “CFPAct”) in two principal
respects.

First, the CFPB said NavyFed made deceptive representations to members about its intent to take legal action against delinquent debtors, its intention to contact members’ military chains of command about their debts, and the effect of delinquency or repayment on consumers’ credit ratings.

Second, the CFPB charged NavyFed with unfairly restricting members’ electronic account access—blocking debit cards, ATM usage, and online account functions—when the member
had a delinquent credit account.

Credit unions nationwide are wondering whether they should worry about a CFPB examination and, more importantly, what, if anything, they should change in their collection practices. The CFPB has very broad enforcement authority when it comes to the federal consumer financial protection laws and a credit union of any size could be subject to CFPB sanctions for violations of those laws. As a reminder, it’s only the CFPB’s supervisory authority that is limited to credit unions with more than $10 billion in total assets.

After studying the language of the CFPB Navy Federal consent decree, we would like to offer the following recommendations for consideration.

Collection Letters
 The credit union should avoid threatening to bring legal action unless and until the credit union has reached the point that legal action is actually the only remaining last resort.
 The credit union should avoid threatening legal action if, in fact, the credit union has a history of rarely using the judicial system to collect past due accounts.
 The credit union should review its collection letter templates from time to time to ensure that they do not contain improper or abusive terms.

Account Freezes
 If the credit union engages in the practice of freezing member’s electronic account access and/or disabling electronic services after the member becomes delinquent on a credit account, it should disclose this practice with its usual account opening disclosures.
 The credit union should consider giving the member advance warning of an impending account freeze.
 The credit union should probably wait until the account is at least 30 days past due before blocking access.
 The credit union should consider selective blocking, e.g., blocking the member’s ATM or debit card, but not online or mobile web platforms that allow the member to check account balances, transfer funds, and make online payments.

A Word About Loss Policies
Many credit unions have policies that authorize the credit union to restrict services and access to members who have caused a financial loss to the credit union. It is generally viewed that the credit union hasn’t suffered a financial loss until it is required to write off the account as uncollectible. Accordingly, credit unions that freeze delinquent members’ accounts should carefully review their financial loss policies before relying on this rationale.

The suggestions above are only some of the matters credit unions should consider in making certain their debt collection practices comply with the CFPAct. Also, this bulletin should not be considered legal advice as each credit union’s policies and practices differ and so do the ways in which laws and regulations apply to those policies and practices.

The Credit Union Practice Group at Shutts & Bowen stands ready to work with your credit union to make sure it takes steps to avoid sanctions like those imposed on NavyFed.

Mike Lozoff, Chair
(305) 415-9516
mlozoff@shutts.com

François Henriquez
(305) 415-9076
fhenriquez@shutts.com

Jennifer Newton
(305) 415-9422
jnewton@shutts.com

Comments

Post a Comment

Please no profanity or political comments.

Popular posts from this blog

TruStage To Launch TSDA, Bringing Stablecoin Infrastructure To Community FIs

MADISON, Wis.— TruStage Tuesday today announced the planned launch of TruStage Stablecoin (TSDA), a fully reserved U.S. dollar stablecoin. At its core, TSDA is designed to broaden access to digital payment infrastructure for community-based financial institutions, TruStage explained. “A trusted partner of credit unions for more than 90 years, TruStage currently works with more than 93% of 4,300+ credit unions nationwide, which collectively hold more than $2 trillion in assets. TruStage Stablecoin will be among the very first stablecoins specific to community based financial institutions and is supported by decades of industry relationships, financial strength, and operational excellence,” TruStage said. “In my career working with credit unions, I’ve never witnessed the level of engagement surrounding any technology advancement similar to what I’m seeing with stablecoin solutions right now,” said Brian Kaas, president and managing director of TruStage Ventures, the venture capital arm o...
Post a Comment
Read Complete Article HERE>»

Sunday Reading - Where Beatniks Come From

  Where Beatniks Come From       An introduction to the Beat Generation The Beat Generation   was an American literary movement that rose to prominence in the 1950s. A loosely affiliated collection of poets, novelists, playwrights, publishers, and other artists reacted to what they considered an anti-intellectual and homogeneous social order following World War II.   The writing of the Beat Generation used experimental forms, surreal imagery, and vernacular language, and emphasized the importance of " spontaneous prose " to mimic the improvisation of jazz. Although the Beats praised canonical poets like William Blake, Arthur Rimbaud, and Walt Whitman, much of their work sought to rebel against literary tradition.   The Beats' radical politics and nonconformity influenced several subsequent countercultural ...
Post a Comment
Read Complete Article HERE>»

As Expected, Fed Opts Not to Raise Rates--But Says It May in Future

WASHINGTON–As expected, the Federal Reserve has adjourned its meeting here without raising rates, but it also indicated it could again do so in the future. The decision means rates remain at a two-decade high. The adjournment without action marks the second consecutive meetings at which the Fed has not raised rates, it the longest period without an increase since it began to lift rates from near 0% in March 2022. In announcing it would maintain the Fed Funds rate at a range of 5.25% to 5.50%, the Fed said in a statement that recent indicators suggest economic activity expanded at a strong pace in the third quarter, job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated. ...
Post a Comment
Read Complete Article HERE>»

James Hunter, Executive Director of Credit Union Development for New Orleans Firemen’s CU, knows too well how expensive it is to be poor.

  NEW ORLEANS FIREMEN’S FCU 􀀁 METAIRIE, L   A passion for empowerment James Hunter knows too well how expensive it is to be poor. It’s what he sees every day as mortgage director and executive director of credit union development for $182 million asset New Orleans Firemen’s Federal Credit Union, Metairie, La., and executive director of The Faith Fund, a nonprofit partnership that seeks to provide a financial hand-up to the undeserved. It’s what inspires him to come to work every day and drives his passion of empowering people and setting them on the path to financial security. “Too many people are too far away from the starting line,” Hunter says. “Payday loans are a big business in Louisiana. Exorbitant fees and interest from payday loans drain more than a quarter of a billion dollars a year. Baton Rouge supports one of the top three pay-day loan markets in the U.S.” The Faith Fund was formed to counteract that. It’s a unique cooperative relationship between like-minded busi...
Post a Comment
Read Complete Article HERE>»

LA County firefighters help each other cope with toughest part of the job

This is an excellent program, and no matter what size your department is, you should be prepared. Scott Ross  talks over issues with Firefighter Richard Conejo who was recently affected by the death of a fellow firefighter . They meet under the auspices of the LA County Fire Department's Peer Support Program. **** Read More ; LA County <b>firefighters</b> help each other cope with toughest part of the job :
Post a Comment
Read Complete Article HERE>»

Is it a ‘skip’ or a ‘pause’? Federal Reserve won’t likely raise rates next week but maybe next month

WASHINGTON — Don’t call it a “pause.” When the Federal Reserve meets next week, it is widely expected to leave interest rates alone — after 10 straight meetings in which it has jacked up its key rate to fight inflation. But what might otherwise be seen as a “pause” will likely be characterized instead as a “skip.” The difference? A “pause” might suggest that the Fed may not raise its benchmark rate again. A “skip” implies that it probably will — just not now. The purpose of suspending its rate hikes is to give the Fed’s policymakers time to look around and assess how much higher borrowing rates are slowing inflation. Calling next week’s decision a “skip” is also a way for Chair Jerome Powell to forge a consensus among an increasingly fractious committee of Fed policymakers. One group of Fed officials would like to pause their hikes and decide, over time, whether to increase rates any further. But a second group worries that inflation is still too high and would prefer tha...
Post a Comment
Read Complete Article HERE>»

CU Board Modernization Act Passes House

Backed by NAFCU and CUNA, the legislation would reduce the number of times CU boards must meet each year. By Michael Ogden | September 30, 2022 at 01:00 PM U.S. Capitol building, Washington, D.C. (Source: Shutterstock) The House of Representatives passed the Credit Union Board Modernization Act on Thursday, the fate of which goes to the Senate, where a similar version was introduced in May. The bill would alter the Federal Credit Union Act’s requirement that federally charted credit unions meet 12 times each year and reduce that number to a minimum of six times each year. For months, CUNA and NAFCU officials have backed the bill , along with representatives from the California and Ohio Credit Union Leagues. “This bill would provide a needed update to credit union board meeting requirements, freeing up time and resources that can be dedicated to meeting members’ needs,” CUNA President/CEO Jim Nussle said. “We thank Reps. Var...
Post a Comment
Read Complete Article HERE>»

If these cuts in salaries catch on, is your credit union ready?

NEW ORLEANS — The first New Orleans firefighters were furloughed on Sunday under a plan requiring six unpaid days off by the end of the year to help stem a precipitous decline in city sales tax revenue during the coronavirus pandemic. The city’s furlough requires almost all 4,700 employees to take the six unpaid days, including police, firefighters and other safety workers, reducing their salaries by about 10% and saving the city $6 million. New Orleans' firefighters' union says the city's furloughs have had an impact on service. The city has required nearly all of its public employees to take at least six unpaid days off before the end of the year in order to offset COVID-19-related budget issues. ...
Post a Comment
Read Complete Article HERE>»

Dolphin Debit Access ATMs Made Simple

Dolphin Debit is the largest “pure play” provider of ATM outsourcing for credit unions in the United States.  We currently operate over 2,000 ATMs for our clients.  Dolphin has been providing ATM outsourcing services to financial institutions across the U.S. for over 16 years. Our entire staff is solely dedicated to our core focus of ATM outsourcing.  Our internal departments are designed specifically for the execution of optimal results for your ATM program.  Whether you have 2 or 200 ATMs, outsourcing will save your credit union time & money, relieve your staff of the heavy burden of ATM management and assure there is a plan in place for future enhancements and technology upgrades.   Let the experts at Dolphin become your ATM department. CONTACT: URL:  www.dolphindebit.com Address: 1340 Rayford Park Road Spring, TX 77386 ph: 877-247-4182 Email:  Dolphininfo@dolphindebit.com Email:  jwoods@dolphindebit.com
Post a Comment
Read Complete Article HERE>»

Syracuse Fire Department Credit Union

 Congrats, Tonia, on your promotion! ================================================= Remember, you're not alone with  NCOFCU.org Join/Upgrade Check out some of NCOFCU's additional features: First Responder Credit Union Academy Financial Literacy Podcasts YouTube Mini's Blog Job Board
Post a Comment
Read Complete Article HERE>»