Former officials from the Consumer Financial Protection Bureau, or CFPB, are calling the watchdog's choice to let Navy Federal Credit Union off the hook for charging its members -- almost exclusively service members, veterans and their families -- millions in illegal overdraft fees unprecedented, and they warn that the agency doesn't seem to living up to its promise to protect troops from financial scams and predatory acts.
"We are at a point where it's very uncertain whether the Consumer Financial Protection Bureau will ultimately step in on the side of consumers and not take the side of their bank as they did here for the Navy Federal customers," Eric Halperin, a former enforcement director at the CFPB, told Military.com in an interview Wednesday.
In November 2024, the consumer protection agency announced that Navy Federal had "illegally harvested tens of millions of dollars in junk fees" and that the financial institution had agreed to a settlement requiring the return of $80 million to its customers and payment of a $15 million fine. Last week, The Associated Press reported that the CFPB had dropped the case and the accompanying consent order that included the settlement, seemingly letting the credit union off the hook.
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Neither Navy Federal nor the CFPB has offered an official statement explaining the move.
In a now-removed news release, the CFPB had explained that, between 2017 and 2021, Navy Federal collected nearly $1 billion in overdraft fees. In that time, though, it also wasn't transparent with its members about how much money they actually had in their bank accounts, making overdrafts more likely.
"When they made purchases with their accounts showing enough money to cover the transaction, the credit union still charged them overdraft fees if the account had a negative balance once the purchase posted to the account, sometimes days later," the watchdog agency noted.
Also, the credit union didn't make clear that any money that its consumers got from services like Zelle, PayPal or Cash App wouldn't actually be available until the next day even though its system would show the money in the account and available to spend.
"Through this practice, Navy Federal collected at least $4 million in fees," the news release said.
Allison Preiss, a former CFPB official, told Military.com in an interview that the agency has been tracking the practice of overdraft fees for years and its research has shown "that for many large finance financial institutions, overdraft has become a big part of the business model."
"It can be an easy profit center," she said.
Military.com reached out to Navy Federal with several questions relating to this case but did not receive a response before publication, including specifically asking the company what it planned to do with the money it agreed to pay out in November.
Navy Federal is one of several credit unions that serve troops and, in turn, enjoy a close relationship that includes access to recruits and the ability to build branches on base. Its marketing often emphasizes this fact by featuring actors in outfits that resemble military uniforms and in military-like settings.
For example, Navy Federal, along with USAA, speaks to Navy recruits during their initial weeks at basic training at Naval Station Great Lakes, Illinois, and offers them the ability to open accounts with either institution.
Last year, KPBS reported that a different credit union, Frontwave, had a similar arrangement with the Marine Corps boot camp in San Diego, California, and the majority of its members are Marines.
Andrew Cohen, who until recently served as the Pentagon's director of the Office of Financial Readiness, told Military.com that these presentations are "given to the impressionable audiences a lot of times" and "the young troop may take it … as gospel, that it must be OK, because otherwise it wouldn't be in here."
"There might be an implied endorsement, when, in fact, no endorsement is implied or given," Cohen added.
In 2022, Frontwave got 12% of its annual profit from overdraft fees -- significantly higher than other credit unions in the state, KPBS reported.
Sen. Elizabeth Warren, D.-Mass., dug into the issue and, in a 2024 letter reviewed by Military.com, Frontwave told her office that, in addition to 54% of its members being Marines, 56% met the definition of "low-income." That year, the credit union took in nearly $62 in late and overdraft fees per member.
Last year, USAA also agreed to settle a class-action lawsuit for $64.2 million over improperly charged fees and high interest rates that violated federal protections for service members who held loans.
When Navy Federal entered into its settlement with the CFPB, it not only agreed to the repayments and the fine, but also to stop charging the banned overdraft fees.
Both former CFPB officials who spoke with Military.com say that these actions are unlikely to happen now.
"We know that Navy federal did not pay the redress provisions. … There's no public evidence to indicate that," Halperin said, noting "that is all money that they had agreed to pay."
Meanwhile, dropping the settled case -- something that the former officials said was unprecedented -- flies in the face of repeated claims being made by Trump administration CFPB leaders that the agency is looking out for troops and veterans, advocates said.
In an April 2025 memo put out to the agency, the CFPB's top lawyer said that the bureau "will focus its enforcement and supervision resources on pressing threats to consumers, particularly service members and their families, and veterans."
"The Trump CFPB has said that they are focused on service members and veterans. … I certainly haven't seen the evidence yet," Preiss said. "I think that the undoing of this case certainly flies in the face of the statements that they've made."
For Cohen and Halperin, the apparent retreat of the CFPB from holding financial institutions accountable means that more will be expected of the Pentagon and of troops themselves.
"This sends a signal to financial predators: It's open season on the consumer," Cohen said.
"Unfortunately, all consumers are going to have to be that much more vigilant to not be ripped off by their financial institution, and that's really not a position we should be putting consumers in," Halperin noted.
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