Consumer complaint received 2024-04-16
Product: Money transfer, virtual currency, or money service — Domestic (US) money transfer
Issue: Other transaction problem — 
Company: NAVY FEDERAL CREDIT UNION (NC)

I am writing to formally lodge a complaint against Navy Federal Credit Union concerning an unauthorized transaction and a fraudulent loan application made using my identity, which directly violates the Electronic Funds Transfer Act ( EFTA ) and Regulation E ( 12 CFR Part 1005 ).

The Electronic Funds Transfer Act ( EFTA ), codified at 15 U.S.C. 1693-1693r, was enacted to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic funds transfer systems. The primary goal of the EFTA is to protect consumers engaging in electronic transfers, including ATM withdrawals, direct deposits, and transfers for bill payments.

12 CFR Part 1005, commonly referred to as Regulation E, implements the EFTA and sets forth the rules that financial institutions must follow regarding electronic funds transfers ( EFTs ). It provides guidelines to protect consumers when they use electronic systems to transfer money and outlines the procedures for resolving errors on accounts. 


**Incident Description : ** - On XX/XX/XXXX, a loan application was forged in my name for {$3900.00} ( Reference Number : XXXX ). 
- Simultaneously, an unauthorized transfer of {$4900.00} was made from my account. 
- Navy Federal was notified within XXXX minutes of the incident. Despite providing all requested documentation, including a Declaration of Forgery/Fraud, my claims have been repeatedly denied, with the focus solely on the transfer and not on the fraudulent loan application and the associated events surrounding these transactions. 

**Violations and Concerns** XXXX. **Non-Compliance with EFTA and Regulation E** : Navy Federal failed to adhere to the liability limitations and notification requirements under Regulation E, which mandates specific responsibilities for financial institutions in the case of unauthorized transfers.

2. **Failure to Protect Consumer Rights under EFTA/Regulation E** : Navy Federal has not fulfilled its obligations to limit my liability for unauthorized electronic fund transfers and to conduct a comprehensive investigation.

3. **Inadequate Fraud Handling Procedures** : The process and response to my fraud alerts and claim submissions have been grossly inadequate, highlighting potential systemic issues within Navy Federals fraud management practices. 

XXXX. **Unauthorized Inquiry and Adverse Impact on Consumer Report** : An unauthorized credit inquiry was made on XX/XX/XXXX as part of a fraudulent loan application ( Reference Number : XXXX ) forged in my name. This inquiry has been recorded on my consumer report and has had an adverse and unfair impact on my XXXX XXXX. Unauthorized inquiries can decrease a consumer 's credit score and are detrimental to one 's financial health and ability to secure future credit under fair terms. 

The presence of this inquiry, linked to fraudulent activities not instigated nor authorized by me, directly contravenes the principles of accurate and fair credit reporting as stipulated under the Fair Credit Reporting Act ( FCRA ). It is imperative that such inaccuracies are corrected promptly to mitigate any further negative impact on my financial reputation and creditworthiness. 

**Key Provisions and Violations under EFTA and Regulation E** 1. Error Resolution Procedures ( 12 CFR 1005.11 ) : Financial institutions are required to investigate errors reported by consumers regarding electronic funds transfers on their account statements. The institution must complete its investigation within specific time frames and correct any error promptly.

Violation : NFCU Failed to investigate or resolve errors as required which lead to liability for the resulting damages to the me as the consumer.

2. Liability of Consumer for Unauthorized Transfers ( 12 CFR 1005.6 ) : Limits the amount a consumer can be held liable for in cases of lost or stolen access devices, such as debit cards, provided the consumer notifies the institution within specified timeframes.

Violation : NFCU failed to limit my liability as the consumer as stipulated, it may be required to refund the unauthorized amounts and may be subject to additional damages. 

XXXX. Initial Disclosures ( 12 CFR 1005.7 ) : Institutions must provide detailed disclosures before a consumer agrees to participate in an EFT service. Disclosures should include conditions of the service, fees, liability rules, and error resolution processes. 
Violation : NFCUs lack of adequate disclosure calls for adminstrative enforcement actions and the requirement to make restitution to me as the affected consumer. 



**Additional Concerns Over Denial Decision** The denial of my claims by Navy Federal Credit Union not only exacerbates the financial distress caused by the unauthorized transactions but also fundamentally undermines the principles of fairness, equity, and the fiduciary relationship expected between a financial institution and its depositors. As a holder of an account insured by the National Credit Union Administration ( NCUA ), I believed in a guaranteed level of protection and fiduciary care that has been conspicuously absent in this instance.

3. **Breach of Fiduciary Duty** : Navy Federal 's decision to deny the claim disregards the duty of prudence, care, and loyalty owed to me as a depositor. The swift notification of the fraudulent activities was met with inadequate and dismissive responses, failing to uphold the trust placed in them by their members. 

XXXX. **Fiduciary Duty Neglected** : The handling of my fraud claim demonstrates a neglect of these fiduciary duties. The lack of a thorough investigation into the unauthorized transactions the subsequent denial of my claims without substantial justification suggests that Navy Federal has not acted with the required level of care and diligence.

5. **Conflict of Interest** : The handling of my case suggests a potential conflict of interest, where the financial institutions procedures for fraud prevention and claim resolution may unduly favor minimizing their financial exposure over protecting consumers, depositors, and beneficial owners ' interests. Such a conflict is detrimental to the trust and safety expected in banking relations. This raises serious concerns about the internal practices and protocols of Navy Federal, particularly regarding the impartiality and integrity of the fraud management process.

6. **Violation of Equitable Indemnity Principles** : The concept of equitable indemnity, where losses should be shifted based on the relationship between the parties and not merely contractual obligations, should compel Navy Federal to accept responsibility for the losses incurred as a result of unauthorized access and transactions. Their failure to do so defies the principles of equitable treatment, which are critical in financial governance.

7. **Equitable Indemnity and NCUA Insurance** : Furthermore, my account with Access Number XXXX is insured by the NCUA, which is designed to protect against losses like those I have encountered. The failure to apply the principles of equitable indemnity in this situationwhere the loss should shift from me to the institution based on our relationship, not on the intent or fault of the parties involveddefies the purpose of such insurance. The denial of my claim prevents me from benefiting from this protection, effectively denying me the equitable relief I am entitled to under the circumstances.

Given these serious concerns, it is imperative that the CFPB conduct a comprehensive review not only of the specific incidents but also of Navy Federals overall approach to handling such sensitive matters. It is essential that corrective measures are implemented to restore confidence and ensure that statutory as well as ethical obligations towards consumers are rigorously upheld. I urge the CFPB to consider these points seriously and to provide the necessary equitable relief to rectify the financial and emotional harm inflicted upon me through no fault of my own. Your intervention is crucial in not only addressing this individual case but in reinforcing the integrity of the credit union system at large. 

**Liability and Enforcement** Civil Liability ( 15 U.S.C. 1693m ) : Consumers may recover actual damages and in some cases additional statutory damages for violations. The law also provides for the recovery of attorney 's fees and court costs. A class action lawsuit may be filed for statutory damages for each named plaintiff and for the class, subject to a cap.

Administrative Enforcement : The Consumer Financial Protection Bureau ( CFPB ) is primarily responsible for enforcing Regulation E. State Attorney Generals may also enforce the provisions of the EFTA and Regulation E. Violations can lead to both regulatory sanctions and direct enforcement actions, including fines and orders for corrective actions.