News & Insights

By growing at “no speed limits,” large credit unions have injured countless numbers of consumers on the road. The industry continuously ignores rules established by the Consumer Financial Protection Bureau (CFPB), boldly revealing that it holds little regard for consumers – and even more alarming, that it has no problem breaking the law and harming consumers in doing so.

Industry leadership continues to argue that it shouldn’t be required to adhere to CFPB’s regulations through intensive lobbying efforts. At the annual CUNA Government Affairs Conference in Washington, President and CEO of CUNA Jim Nussle bragged about the “solid” relationship-building with the CFPB administration that has helped sway the bureau to lay off on creating more rules for the industry. Conference attendees even discussed strategies to ensure “CFPB can help America’s credit unions,” identifying loopholes to avoid the regulatory system altogether.

NCUA Chairman J. Mark McWatters (yes, the same guy who ‘leads a federal agency’ from his home in Dallas and enjoys $45 cocktails while on the job) also wrote to CFPB Director Richard Cordray requesting CFPB exempt credit unions from CFPB examination and enforcement authority. McWatters went on to claim that these large credit unions face regulatory burden and fines when under CFPB’s examination, and “given their positive, consumer-focused role” it would be better to “level the playing field for all parties involved.”

How on earth would exempting big credit unions protect consumers?! These massive credit unions acting like banks – without the same taxation – have already squashed smaller credit unions that actually stick to their original mission. Freeing big credit unions of CFPB provisions would only reward them for their mission creep, while also creating an environment prone to mistreatment of members. 

Also, if CFPB can’t oversee the behavior of the largest credit unions (many of which are repeat offenders of crimes ranging from embezzlement to fraud), then who will? We know it won’t be NCUA. (Exhibit A. Exhibit B. Exhibit C. Exhibit D.)

It would be one thing if credit unions practiced what they preached, but unfortunately, there have been too many examples proving otherwise – that they are willing to put members in danger for the sake of revenue. Melrose Credit Union, liquidated in August of 2018 after defaulting on millions in taxi medallion loans, used out of town brokers to push high-fee balloon loans on cab drivers that often couldn’t afford them. As Melrose’s house of cards began to collapse, the $1.1 billion credit union resolved to take its members down with it, specifically innocent cab drivers looking to make a living. Melrose has filed at least 81 suits against independent cab owners, seeking their houses, cars, and other assets. Hmmm, shouldn’t it be the credit union’s responsibility to investigate the soundness of the loans before shelling them out in the first place? Multiple witnesses cited that Melrose didn’t run any credit history checks when giving out these loans, and it’s obvious no market research on the looming effects of increased urban rideshare services was conducted either. So in essence, Melrose didn’t do its homework, yet won’t accept its failing grade.

Instead of taking accountability for the results of its own careless, greedy pursuits, Melrose continues to point the finger at the taxi drivers. Many of them have worked tirelessly to achieve the American dream, now only to have it all stripped away by an institution that promised to support them in doing so. As one Philadelphia taxi cab driver affected by Melrose’s lawsuits put it, “When people are making money, no one is complaining.”

Melrose isn’t the only culprit of consumer abuse. According to recent reports, Virginia-based Navy Federal Credit Union, the country’s biggest credit union at $91.8 billion, faces a class action lawsuit over its non-sufficient fund (NSF) practices that cites its “predatory and unethical” behavior. The suit claims that Navy FCU charged members multiple overdraft fees on the same transaction to increase its own revenue. We’ve already seen that massive credit unions have strayed away from their mission of supporting people of modest means, but this takes things to a whole new level. This credit union isn’t just forsaking supporting members, it could be actually stealing from them.

Sadly, this isn’t the first time Navy FCU may have hurt members in this fashion. In 2016, the CFPB fined Navy FCU $28.5 million after it made false threats about debt collection to active-duty military personal, retired servicemembers, and their families, even freezing some customers out of their accounts entirely. This is, ironically, the opposite of its purpose of ensuring its members have access to credit.

How can an industry that claims it caters to consumers refuse to take legislation created to protect those same consumers seriously – and then have the audacity to put the blame on consumers when something goes wrong? These large credit unions and the leaders that condone their behavior aren’t fooling anyone anymore. We need Congress to put the credit union industry in its place and let it know consumers will always come before their paychecks.