UNITED STATES OF AMERICA CONSUMER FINANCIAL …

2016-CFPB-0024 Document 1 Filed 10/11/2016 Page 1 of 33

U N ITED STATES OF AMERICA CON SU MER FIN AN CIAL PROTECTION BU REAU

ADMINISTRATIVE PROCEEDING File No. 2016-CFPB-0 0 24

In the Matter of:

CONSENT ORDER

NAVY FEDERAL CREDIT UNION

The Consum er Financial Protection Bureau (Bureau) has reviewed the debt collection activities of Navy Federal Credit Union (Respondent, as defined below) and has identified the following law violations. First, Respondent violated the Consum er Financial Protection Act of 20 10 (CFPA) by m aking deceptive representations to consum ers in connection with its debt collection activities about its intention to take legal action against delinquent debtors, its intention to contact consumers' military chains of com m and about consum ers' debts, and the effect of delinquency or repaym ent on consum ers' credit ratings. Second, Respondent violated the CFPA by unfairly restricting consum ers' electronic account access--blocking debit cards, ATM usage, and online account functions--when the consum ers had an overdrawn deposit account or delinquent credit account. Under sections 10 53 and 10 55 of the CFPA, 12 U.S.C. ?? 5563 and 5565, the Bureau issues this Consent Order (Consent Order).

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I Ju ris d ictio n

1. The Bureau has jurisdiction over this m atter under sections 10 53 and 10 55 of the CFPA, 12 U.S.C. ?? 5563 and 5565.

II Stip u latio n

2. Respondent has executed a "Stipulation and Consent to the Issuance of a Consent Order," dated October 7, 20 16 (Stipulation), which is incorporated by reference and is accepted by the Bureau. By this Stipulation, Respondent has consented to the issuance of this Consent Order by the Bureau under sections 10 53 and 10 55 of the CFPA, 12 U.S.C. ?? 5563 and 5565, without adm itting or denying any of the fin din gs of fact or conclusion s of law, except that Respon den t adm its the facts necessary to establish the Bureau's jurisdiction over Respondent and the subject matter of this action.

III D e fin itio n s 3. The following definitions apply to this Consent Order: a. "Affiliate" m eans any person that controls, is controlled by, or is under common control with Respondent. b. "Board" m eans Respondent's duly-elected and acting Board of Directors. c. "Com m anding Officer Threat Letter" m eans a letter described in Paragraphs 29-31 and sent by Respondent to a consum er during the Relevant Period.

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d. "Deceptive Debt Collection Letter" m eans a letter described in Paragraphs 1418, 29-31, and 39-42, and sent by Respondent to a consum er during the Relevant Period.

e. "Effective Date" m eans the date on which this Consent Order is issued. f. "Regional Director" m eans the Regional Director for the Southeast Region for

the Office of Supervision for the Consum er Financial Protection Bureau, or his/ her delegate. g. "Related Consum er Action" m eans a private action by or on behalf of one or m ore consum ers or an enforcem ent action by another governm ental agency brought against Respondent based on substantially the sam e facts as described in Section IV of this Consent Order. h. "Relevant Period" includes the period from J anuary 1, 20 13, to the date of this Consent Order. i. "Respondent" m eans Navy Federal Credit Union and its successors and a ssign s. j. "Redress Eligible Consum er" m eans a consum er who:

i. Made a Redressable Paym ent to Respondent; or ii. Received a Com m anding Officer Threat Letter during the Relevant

Period. k. "Redressable Paym ent" m eans a paym ent to Respondent on a consum er debt

m ade within 60 days of the date of a Deceptive Debt Collection Letter during the Relevant Period, with the following lim itations:

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i. Redressable Paym ent does not include a paym ent where Respondent can dem onstrate that the letter was undeliverable and no Deceptive Debt Collection Letter was received by the consum er;

ii. Redressable Paym ent does not include a paym ent by an autom obile insurance company or dealer;

iii. Redressable Paym ent does not include a paym ent m ade as a result of a Navy Federal Credit Union refinance or consolidation loan that was applied for or initiated before the date of the Deceptive Debt Collection Letter; and

iv. For any other paym ent m ade by a financial institution that extinguished the consum er's debt, as with a refinance or consolidation loan, Respondent m ay cap the Redressable Paym ent at $ 1,0 0 0 .

l. "Service Provider" has the sam e m eaning as set forth in section 10 0 2(26) of the CFPA, 12 U.S.C. ? 5481(26). IV Bu re au Fin d in gs an d Co n clu s io n s

The Bureau finds the following: 4. Respondent is a federal credit union with its principal place of business in

Vienna, Virginia. 5. As of Decem ber 31, 20 15, Respondent had $ 73,286,80 0 ,0 0 0 in assets. 6. Respondent is an insured credit union with assets greater than $ 10 ,0 0 0 ,0 0 0 ,0 0 0

within the m eaning of 12 U.S.C. ? 5515(a). 7. Respondent is a "covered person" as that term is defined by 12 U.S.C. ? 5481(6).

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8. At all tim es relevant to this Consent Order, Respondent offered and provided a wide range of consum er financial products and services, including accepting deposits and m aintaining deposit accounts, extending credit, servicing loans, and collecting debt related to consum er financial products and services.

9. Mem bership in Navy Federal Credit Union is lim ited to people who are or have been United States m ilitary servicem em bers, Departm ent of Defense civilian em ployees or contractors, U.S. governm ent em ployees assigned to Departm ent of Defense installations, and their im m ediate fam ily m em bers. Fin d in gs an d Co n clu s io n s as to D e ce p tive D e bt Co lle ctio n Le tte rs

10 . Respondent generally handles its debt collection activities using Navy Federal Credit Union em ployees up to the point of litigation. Its prim ary collection activities are telephone calls and letters to delinquent and overdrawn m em bers.

11. From at least J anuary 1, 20 13, until after Respondent learned of this investigation, Respondent's com pliance controls and em ployee training regarding debt collection communications were inadequate.

12. Respondent m ade deceptive representations to hundreds of thousands of consumers in the course of attempting to collect on consumer debts.

13. Am ong Respondent's m any debt collection letter tem plates in use at various tim es since at least J anuary 1, 20 13, several contained m aterial representations that were likely to m islead reasonable consum ers, including the following:

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