In a recent enforcement action, the Consumer Financial Protection Bureau (CFPB) has held VyStar Credit Union—formerly known as JAX Navy Federal Credit Union—accountable for a disastrous online banking transition that harmed its members. In May 2022, VyStar launched a new virtual banking system that was fraught with technical issues, leaving thousands of members unable to access basic banking services for weeks. Some features remained unavailable for over six months, resulting in significant disruptions and fees for impacted families.
The CFPB has ordered VyStar to compensate affected members and imposed a $1.5 million penalty on the credit union, with funds going to the CFPB’s victims relief fund. This decision was reached after a detailed investigation in collaboration with the National Credit Union Administration (NCUA), emphasizing VyStar’s failures and the impact on consumer trust and financial well-being.
The Impact of VyStar’s Botched Online Platform
VyStar, one of the country’s largest credit unions, now serves over 980,000 members and manages $14.75 billion in assets across Florida and Georgia. Initially, the credit union expected only a brief service disruption during the system transition. However, due to premature deployment and insufficient preparation, the platform faced severe technical issues from launch. The system was soon taken offline, and upon reactivation, many core services remained unavailable for months.
These service failures left members unable to perform essential banking tasks. Some incurred late fees and interest due to interrupted bill payments, while others were left without access to their funds. “VyStar’s careless errors inflicted financial harm on their credit union members,” said CFPB Director Rohit Chopra, highlighting the significant impact on VyStar members’ daily lives.
CFPB Findings on VyStar’s Consumer Protection Violations
Following its investigation, the CFPB found VyStar violated consumer protection laws under the Consumer Financial Protection Act, with findings indicating:
- Loss of Access to Accounts and Funds: VyStar proceeded with the launch despite red flags and internal warnings, resulting in prolonged outages and limited functionality that financially impacted members.
- Neglect of Due Diligence: In its rush to meet a launch deadline, VyStar neglected adequate testing. The result was a platform plagued by issues that compromised service quality and limited functionality for months.
The CFPB and NCUA concluded that VyStar’s actions not only inconvenienced members but also introduced risks to the credit union’s reputation and regulatory compliance.
Enforcement Actions and Next Steps
To address these issues, the CFPB’s order requires VyStar to take corrective actions aimed at consumer protection and quality service. These actions include:
- Refunding Fees: VyStar must reimburse members for fees and costs incurred as a result of the platform failure, including any third-party fees.
- Enhancing System Update Protocols: VyStar is required to develop robust contingency plans for future system updates, including allocating adequate customer service resources during transitions to avoid similar disruptions.
- Paying a Civil Penalty: VyStar will pay a $1.5 million fine to the CFPB’s victims relief fund.
VyStar’s experience underscores the necessity of rigorous testing, effective planning, and member-centered diligence during system upgrades. The CFPB’s enforcement action emphasizes the need for credit unions to prioritize consumer protection, thereby safeguarding member trust and financial stability through accountable management and reliable services.
Author: Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clients’ criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jennifer’s guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
Sign Up for the Twice Monthly Newsletter
Just enter your email address at the top orange bar at:
Collection Compliance Experts – “The Power of Expertise: Oversight Perfected”
It’s that easy! Twice a month – we provide blog updates and Resources for the Collection and Industry Professional.
Your email is just for this newsletter. We never sell your information. No fee. Opt-out at any time.
