April 26, 2024

Warren, Bipartisan Coalition of Lawmakers Demand Explanation from Frontwave Credit Union for Exploitative Overdraft Fees Targeting Marine Recruits

“Frontwave Credit Union has for over two decades preyed on Marine recruits who are automatically enrolled in Frontwave checking accounts…during boot camp, when recruits are young, often away from home for the first time, and particularly vulnerable to marketing tactics.” 

“Frontwave owes service members and the American public an explanation for its deeply exploitative overdraft practices that harm service members and their families.” 

Text of Letter (PDF)

Washington, D.C. – Senators Elizabeth Warren (D-Mass.), JD Vance (R-Ohio), Laphonza Butler (D-Calif.), Richard Blumenthal (D-Conn.),  Tim Kaine (D-Va.), Cory Booker (D-N.J.), Ben Cardin (D-Md.), Mazie Hirono (D-Hawaii), Bernie Sanders (I-Vt.), and Representative Sara Jacobs (D-CA) wrote to Frontwave Credit Union, demanding an explanation for its exploitative overdraft fees targeting Marine recruits. This letter follows an investigation from KPBS earlier this year exposing Frontwave’s predatory practices. 

For 25 years, Frontwave Credit Union has had an exclusive agreement with the Marine Corps that funnels recruits and automatically enrolls them in Frontwave checking accounts to receive their paychecks by direct deposit. Approximately 99% of recruits were automatically enrolled with Frontwave.

Every year, around 20,000 Marine recruits, some as young as 17 years old, go through boot camp at Marine Corps Recruit Depot (MCRD), California, many navigating managing a budget and checking account for the first time. When a Frontwave member’s account is overdrawn by more than $20, they are charged a $20 fee every time they make a purchase – up to a negative $500 account balance. Base pay for newly enlisted Marines is around $1,800 – $2,000 per month before taxes. A $500 debt to Frontwave, compounded with interest, could take years for a recruit to repay and be disastrous for their credit score. 

In 2022 alone, Frontwave made $7.8 million from overdraft and non-sufficient funds (NSF) fees. Frontwave’s entire profit came from overdraft fees, and was triple the average for state-chartered credit unions. Without the revenue from overdraft fees, Frontwave would have faced significant losses for years. 

This investigation highlights a larger issue with overdraft fees – while the goal of overdraft programs is to cover occasional budgeting errors, they often fail to meet the needs of customers. The CFPB found that these fees harm the most vulnerable consumers, with 9% of accounts incurring 79% of all combined overdraft and NSF fees. 

“Although your credit union is required by its contract with the U.S. Marine Corps to provide financial counseling services, former Frontwave employees have stated that the financial classes ‘were an absolute joke,’” the lawmakers wrote. 

While Frontwave claims that its overdraft program is supposed to be “a benefit for members who need a bridge between paychecks,” they also require members to manually set up alerts for low or negative account balances. When members are late or overdue on payments for more than 30 days, Frontwave may report them to a consumer reporting database, which makes it difficult to open a bank account elsewhere. 

The senators are demanding answers from Frontwave about their exploitative practices, communication with customers about overdraft policies and options to opt-out or avoid fees, their exclusive contract with the Marine Corps, and the extent of the financial services training they offer recruits.

Senator Warren is a long-time leader in protecting consumers from predatory fees and practices: 

  • In July 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection, Senator Warren blasted big banks’ use of predatory overdraft fees and called on the CFPB to continue its oversight of these giant banks. 

  • In June 2023, Senator Warren sent a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra highlighting findings from a recent investigation into the late fee practices of the ten largest credit card issuers and urging the CFPB to finalize its proposed rule that would save American families up to $9 billion a year.

  • In June 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren applauded the Consumer Financial Protection Bureau’s (CFPB) proposed rule to cap unreasonable credit card late fees, which could save working families billions of dollars each year.

  • In May 2023, Senator Warren led lawmakers in sending a letter to ten of the largest credit card issuers – PNC, JPMorgan Chase, Capital One, Citigroup, Discover, Bank of America, American Express, Wells Fargo, US Bancorp, and USAA –  requesting information on their credit card late fee practices following the Consumer Financial Protection Bureau’s (CFPB) proposed rule to limit exorbitant late fees and the banking lobby’s strong pushback against this proposed rule.

  • On February 15, 2023, Senator Warren delivered a speech on the fight to protect our economy and outlined an agenda for what’s next to increase competition.

  • On December 16, 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren asked Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra about the CFPB’s achievements over the last year to hold big banks and giant corporations accountable and put money back in working families’ pockets.  

###