By Debbie Gregory.

USAA Federal Savings Bank will pay more than $12 million to 66,240 military, retiree and veteran account holders to resolve various allegations relating to members’ accounts and resolving errors, in a settlement reached this week with the Consumer Financial Protection Bureau.

The CFPB alleges that USAA failed to properly resolve errors; failed to honor members’ requests to stop preauthorized payments through Electronic Fund Transfers; and that it reopened accounts without members’ authorization and without notifying them.
The bureau found the alleged violations during a review of the bank’s practices.

Under the settlement, filed January 3, 2018, USAA will pay $181.59 each to the 66,240 members allegedly denied a reasonable investigation of the error they reported. USAA will also pay the Consumer Financial Protection Bureau a $3.5 million fine.
USAA neither admits nor denies the allegations, according to the consent order. The consent order does note that USAA has been addressing these issues as well as changing some of their policies and procedures for more than a year and began providing restitution payments for some of those affected in 2017.

USAA also had a separate procedure for those disputing an error regarding a payday loan. It required the customer to contract the payday lender to dispute the transaction. USAA representatives refused to investigate often in the cases of payday loans. Additionally, the customer also was required to have a written report notarized if the error involved a payday lender. The Military Lending Act concerning limitations o payday loan applies to active duty members and dependents and does not apply to military retirees nor veterans who are also eligible.

The Consumer Financial Protection Bureau alleges that USAA failed to properly resolve errors or honor the requests of members to stop preauthorized payments via Electronic Fund Transfers. It is also alleged that USAA reopened accounts without the authorization of members or notification to them in the case of 16,980 previously closed accounts and resulted in 5,118 accounts incurring fees estimated to be more than $269,365. The reopening of these accounts also cause some customers to be overdrawn and subject to fees, provide creditors the opportunity to initiate debits to the accounts and draw down the funds. In July of 2017, USAA reimbursed these customers $270,521.

As part of the settlement, USAA must, among other things, grant stop payments to all consumers who contact the bank within three days of future preauthorized EFTs asking for that action; implement the requests without requiring consumers to contact the merchant first; honor the stop payment requests for EFTs free of charge for a period of two years from the settlement; conduct prompt, thorough and reasonable investigations of reported errors, whether or not consumers have submitted a written statement; and stop requiring customers to get their written statement notarized.

Additonally, once a customer closed an account, USAA cannot proces any additional transactions to the account. If USAA furnished ay infornation to a credit reporting agency on those accounts they reopened, they must notify them to delete that information as well.