CFPB vs. Navy Federal - There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.

On November 7, 2024, the Bureau issued an order against Navy Federal Credit Union, headquartered in Vienna, Virginia.

Navy Federal is the largest retail credit union in the United States, with more than 13 million members with ties to the armed forces, Department of Defense, or National Guard and their families.

The Bureau found that, from 2017 through 2022, Navy Federal engaged in unfair acts or practices in violation of the Consumer Financial Protection Act of 2010 when it charged overdraft fees on debit-card purchases and ATM withdrawals when consumers’ accounts had insufficient funds at the time the transactions settled even though they had sufficient funds when they made the transaction. Navy Federal knew members were not likely to understand these unanticipated overdraft fees.

The Bureau also found that, through November 2020, Navy Federal engaged in unfair acts and practices by charging overdraft fees when it delayed in posting credits to members’ accounts from funds received through person-to-person payment networks, even though those funds appeared to members to be available for immediate use.

The order prohibits Navy Federal from charging either overdraft fee and requires it to pay at least $80,689,100 in consumer redress and a $15 million civil money penalty.

PHOENIX Consulting Notes:

This failure lays squarely at the feet of the C-Suite Leadership. The C-Suite Leadership failed to understand the dangers lurking within the regulatory landscape, failed to educate themselves regarding solutions, and failed to implement the necessary changes (either in people or technology) to address what should have & could have been a very simple administrative change.

Which bring me to my next topic, "The Importance establishing an operational culture of Critical Thinking. This culture must be embraced by the C-Suite members, the first line operational leadership members, and the company as a whole."

In my role as a regulatory consultant, I make a point at the start of every engagement to work from the top down. I know from decades of experience that you cannot change a culture absent implementing changes within the mental mindsets of the C-Suite leadership. If that cannot be fixed, the company cannot be fixed. It is really that simple.

With that in mind, please take a moment to review and consider the following steps:

Question assumptions. Critical thinkers are inquisitive and look to find the what and the why behind every proposition. We saw the need for this when our financial markets melted in 2008. Crisis can bring out the best critical thinking because it forces you to question how and why you ended up in trouble.

Adopt different perspectives. Take advantage of the genders and cultures represented in today’s diverse management landscape. An Indian-trained engineer may not view a problem the way one raised in Iowa will. Both may have the same problem-solving tool kit, but their different experiences can provide valuable insights.

See potential. Assumption-busting and harnessing multiple perspectives are deductive skills. Critical thinkers should also have a creative bent that allows them to see opportunities where others see obstacles. For example, one executive may see a production snag as a problem whereas a savvy thinker must view it as an opportunity to revamp the process to produce something new.

There is one additional aspect of critical thinking that is vital to today’s leader: managing ambiguity. The speed of business, intertwined as it is with global factors and complex supply chains, dictates that you will never know all the variables. Therefore, you need to get comfortable with operating in an environment where change is constant and rapid decisions are required.

In a world of growing uncertainty one thing is certain; we will need sharp critical thinkers who can size up the situation, realize the potential where others may not, and seize opportunities through prompt decision-making.

The CFPB's Consent Oder can be found here:

cfpb_navy-federal-credit-union-consent-order_2024-11.pdf

The CFPB's Stipulation can be found here:

cfpb_navy-federal-credit-union-stipulation_2024-11.pdf

The CFPB's Press Release can be found here:

CFPB Orders Navy Federal Credit Union to Pay More Than $95 Million for Illegal Surprise Overdraft Fees | Consumer Financial Protection Bureau

The Case Docket Report can be found here:

https://www.consumerfinance.gov/administrative-adjudication-proceedings/administrative-adjudication-docket/navy-federal-credit-union-2024/