CFPB Slaps Navy Federal Credit Union with $95 Million Penalty Over “Gotcha” Overdraft Fees

The Consumer Financial Protection Bureau (CFPB) has ordered Navy Federal Credit Union to pay over $95 million to settle allegations of “surprise” overdraft fees that blindsided millions of customers. The penalty includes $80 million in refunds to consumers and a $15 million fine that will go to the CFPB’s victims relief fund, marking the largest amount the CFPB has ever clawed back from a credit union.

Between 2017 and 2022, Navy Federal reportedly charged millions in overdraft fees that its members didn’t see coming. Picture this: you check your balance, see enough funds for a purchase, go about your day, only to find out days later that Navy Federal hit you with a $20 overdraft fee. For some Navy Federal members — many of them active duty servicemembers and veterans — these surprise charges were an unpleasant shock.

“Navy Federal illegally harvested tens of millions of dollars in junk fees,” said CFPB Director Rohit Chopra, underscoring the agency’s frustration with practices that hit consumers unexpectedly. “The CFPB’s work to rid the market of illegal junk fees has saved American families billions of dollars.” The implication? The credit union’s actions weren’t just a business misstep; they were a violation of trust.

The “OOPS” Program that Caused More than an Oops

The optional overdraft program Navy Federal called “OOPS” turned out to be more than a one-time blunder for many members. Here’s how it worked: Navy Federal would charge $20 for overdraft transactions, and members, believing they had enough in their accounts at the time of purchase, wouldn’t know until it was too late. These fees added up fast, and Navy Federal pulled in close to $1 billion this way between 2017 and 2021 alone.

There were two main “gotchas”:

1. Fees on Sufficient Balances: Members would make a purchase or withdrawal with enough funds to cover it at the time, but if their account dipped into the red when the transaction finalized days later, they’d be hit with a $20 overdraft fee. Navy Federal collected about $44 million each year from these fees, according to the CFPB.
2. Delayed Posting on Peer-to-Peer Payments: Navy Federal’s systems showed incoming payments (like Zelle, PayPal, or Cash App) as available right away. However, the credit union didn’t disclose that funds received after a certain cutoff wouldn’t actually post until the next business day. Members, trusting they had access to these funds, would spend them — only to be slapped with an overdraft fee when the delay took effect.

The kicker? Federal regulators have been warning banks and credit unions about surprise overdraft fees since at least 2015, but Navy Federal kept the “OOPS” program going until the CFPB stepped in.

CFPB’s Orders: The Next Steps for Navy Federal

The CFPB’s action doesn’t just mean refunds — it means a real policy shift. Under the order, Navy Federal is permanently banned from charging overdraft fees under similar circumstances, meaning members won’t face these unexpected charges in the future. Here’s what else Navy Federal is required to do:

• Refund the Surprise Fees: Navy Federal will repay more than $80 million to consumers charged the illegal fees.
• End Certain Overdraft Charges Altogether: The credit union can no longer levy overdraft fees tied to transactions with sufficient initial balances or peer-to-peer payments that don’t post right away.
• Pay a $15 Million Fine: The credit union will also contribute $15 million to the CFPB’s victims relief fund.

For Navy Federal’s 13 million members, this ruling is a reminder that accountability matters. But the action against Navy Federal is also part of a broader campaign by the CFPB to rein in fees that have often left consumers feeling taken advantage of. In January 2024, the CFPB proposed a rule to treat overdraft fees more like credit card interest, putting hard limits on what banks and credit unions can charge.

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