USAA to Pay $15.5M in Deal with the CFPB
The Consumer Financial Protection Bureau (CFPB) announced in a consent order on Thursday, January 3, that the USAA Federal Savings Bank will pay customers more than $12 million in restitution and a $3.5 million fine. The CFPB said that USAA neglected to stop payments on customers’ preauthorized and recurring electronic fund transfers (EFT) from 2011 to 2016. The bank also failed to initiate proper error resolutions or investigations after receiving customer complaints.
The consent order also said USAA had a different procedure for suspected errors involving payday lending ETFs. When customers had complaints about a payday loan, whether it was unauthorized or in any way incorrect, USAA instructed customers to contact the payday lender as opposed to their bank to dispute the transaction error. On many occasions, USAA representatives would not investigate errors relating to payday loans and even told customers that their membership was “at risk” if they asked for an error resolution investigation, according to the consent order.
“On numerous occasions prior to 2015, USAA failed to enter stop payment orders after account holders notified the bank of their desire to stop payment on preauthorized EFTs, including by refusing to enter stop payments or by requiring consumers to contact the merchants initiating the EFTs as a prerequisite to implementing stop payment orders,” the CFPB said. “In some of these instances, USAA failed to enter stop payment orders because consumers requested to stop payments to payday loan lenders.”
The order said that USAA reopened almost 17,000 closed accounts without customer authorization, violating the Consumer Financial Protection Act. More than 5,000 customers incurred about $270,000 in fees. USAA reimbursed those customers, plus interest, in July 2017.
“In 2017, we began providing restitution payments to some affected members, and improved our procedures,” the bank said in a statement. “None of the issues reflect an intention to take advantage of our members. In fact, we believed our processes would help resolve matters faster. We take responsibility for this situation.”
The roughly $12 million set aside for restitution will compensate more than 66,000 customers who reported potential errors but were not provided proper investigation, according to the CFPB.