The CFPB and limiting service to members

On the heels of the recent CFPB Enforcement Action on Navy Federal, we’ve had a flurry of questions regarding the practice of limiting members’ services. The most commonly asked question is “Is it a regulatory violation for us to disable electronic access, including a device such as a debit card, to a member’s account if he or she is delinquent?”

Although this is a bit complicated, the short answer may be “Yes, according to the CFPB in their recent enforcement action issued to Navy Federal.”

The CFPB found that Navy Federal had violated UDAAP as they determined the practice to be “unfair.” An unfair practice is defined as one that meets the following criteria:

(A) the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers; and (B) such substantial injury is not outweighed by countervailing benefits to consumers or competition.

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