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USAA has to meet a higher standard

January 10, 2019

USAA is a magnificent San Antonio success story and a crucial pillar of this community. But a subsidiary failed to honor thousands of its customers’ banking rights, and in doing so, it failed to meet the firm’s high standards.

USAA Federal Savings Bank, a subsidiary, must now pay a $3.5 million civil penalty to the Consumer Financial Protection Bureau, along with $12 million in restitution to some 66,000 customers. And then there is the public relations hit USAA will take.

But if nothing else, this regulatory action reflects the importance of the CFPB. Much maligned by certain members of Congress and the industry, the agency is a watchdog that serves consumers and shines a light on bad practices.

This is what the CFPB found: USAA Federal Savings Bank failed to follow through on stop-payment requests for electronic transfers. Some of these requests involved payments to payday lenders.

Those customers who believed the payment requests were made in error were threatened with legal action and major fines. The bank also reopened nearly 17,000 closed accounts without customer authorization. About 5,100 consumers incurred nearly $270,000 in fees after their accounts were reopened. USAA has repaid those customers.

Consumers have a right to close accounts and stop automatic payments.

These practices occurred between 2011 and 2016, and USAA has taken a number of steps to address many of these issues, including making restitution payments. In agreeing to a consent order, USAA neither admitted to nor denied the agency’s findings, but in a statement said it takes responsibility for its actions.

Good, but USAA will have to regain trust on this score.

In the meantime, the outcome reflects the need for the CFPB.

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