The CFPB ordered Navy Federal Credit Union to pay $28.5 million in October 2016 — $23 million in consumer restitution plus $5.5 million civil penalty — for illegal debt collection practices against hundreds of thousands of active-duty and retired military members from 2013–2015 including false threats of lawsuits (97% of the time never filed), threats to contact commanding officers, and unlawful account freezes.

Navy Federal Credit Union — CFPB $28.5 Million Illegal Debt Collection Penalty (2016)

Outcome: The CFPB ordered Navy Federal Credit Union, the world's largest credit union, to pay $28.5 million in October 2016 — $23 million in consumer restitution and $5.5 million in civil money penalties — for systematic illegal debt collection practices that harmed hundreds of thousands of active-duty military service members, retired service members, and their families from January 2013 through July 2015.

Navy Federal Credit Union, headquartered in Vienna, Virginia, had built debt collection practices that crossed multiple legal lines in its attempts to collect from members who had fallen behind on loan payments. The most significant violation involved false threats of legal action: Navy Federal sent letters to members threatening lawsuits to collect overdue debts, but in reality took such action only approximately 3% of the time — meaning the threat was false 97% of the time. Hundreds of thousands of members received communications implying that failure to pay would result in being sued, when the credit union had no actual intention to pursue litigation against the vast majority of those threatened.

The credit union also exploited the military service relationship in ways the CFPB found abusive. Navy Federal threatened to contact members' commanding officers about their delinquent debts — a threat calculated to weaponize members' military career concerns as collection leverage. The credit union also froze affected members' electronic account access, disabling banking cards and digital services if they did not pay overdue loans, cutting off members from their own money and all electronic banking functions.

Additional violations included misrepresentations about credit consequences: Navy Federal told members that failing to pay loans would make it difficult to obtain additional credit from the credit union — even when the credit union did not actually know whether that was true for a given member's circumstances.

Primary Source: CFPB Enforcement Action — Navy Federal Credit Union (October 2016)