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On November 7, the CFPB and Navy Federal CU (Navy Fed) agreed to a consent order where Navy Fed is required to pay more than $95 million for overdraft fees charged to members going back as far as 2020. At issue was the policy of “Authorized-Positive Settled Negative” (APSN) overdrafts and the changes in settlement deadlines and delays for person-to-person (P2P) payments.
The “Authorized-Positive Settled Negative” situation occurs when a member makes a payment and it appears as if they have the sufficient funds available to them, but in the course of processing, their account dips below the amount needed to make the payment. When this happens, the member is charged either an overdraft protection fee or an insufficient funds fee.
Proper disclosure of available versus actual balance has previously been considered sufficient to inform members that they need to ensure that their transactions will settle positive when a merchant sends the payment through. In this case, the CFPB deems that disclosure did not offer sufficient protection of members and held Navy Fed responsible for charging surprise fees. Given this ruling, credit unions should use caution when assessing fees on members for APSN transactions and may want to consider refunding many of these fees when they come through.
Navy Fed also failed to disclose the transaction processing deadline for P2P transactions, leading members to believe that funds were available upon transfer. Credit unions using these P2P payments through an embedded process in their mobile or online banking apps should ensure that they provide notice to their members of when funds will be deposited and available for use.
If you have questions concerning this ruling, please email Ellen Parent, League Director of Compliance, at eparent@mainecul.org.