A credit union in Jacksonville, Fla., faces at $1.5 million fine for allegedly “stranding consumers” from accessing their money and accounts resulting from the “botched” rollout of a new online banking system, the federal consumer financial protection agency said Thursday.
According to the Consumer Financial Protection Bureau (CFPB), VyStar Credit Union launched in 2022 a new online banking system. But, CFPB charged, the credit union’s new system “made it difficult for credit union members to perform basic banking functions for weeks, with some features unavailable for more than six months,” the agency said, adding “Families incurred fees and costs as a result of these problems.”
The bureau said in addition to a $1.5 civil money penalty (CMP), VyStar is ordered to ensure that all consumers are made whole by refunding fees charged to those affected, and to clean up its “broken process for updating its systems.”
In particular, CFPB ordered, VyStar must create contingency plans to minimize the impact on consumers’ ability to use its banking platform. “The plans must include sufficient customer service resources to address consumer problems, and ensure upgrades and maintenance for consumer-facing banking systems are performed in a timely manner,” CFPB said.
The credit union holds $14.75 billion in assets, making it the 13th largest credit union in the nation. The credit union also counts more than 984,000 members. Figures are from the March 2024 NCUA call reports. In a release, NCUA said the credit union has 70 branches in Florida and 10 branches in Georgia.
NCUA alleged in the release that the VyStar service interruption to its members during the May 2022 rollout of the new online banking system was anticipated by the credit union. However, the agency charged, the interruption “turned out to be much longer.”
“The new system crashed upon launch because VyStar brought it online prematurely and failed to establish or follow critical processes to ensure its success,” the agency said. “The platform was taken offline soon after launch. Upon bringing the system back online, the new platform lacked key banking services, some of which were not restored for months.”
The bureau said it found that the outage and subsequent limited functionality of the new banking platform “harmed VyStar members in significant ways.” The CFPB said affected consumers were unable to manage their accounts, were charged late fees when their online bill payments did not go through and “were in many cases unable to access their funds.”
In conjunction with the CFPB announcement, National Credit Union Administration (NCUA) Board Chairman Todd Harper and Board Member Tanya Otsuka (both Democratic appointees) issued a joint statement. (CFPB and NCUA worked together in investigating the incident at the credit union.) Harper called VyStar’s action “management failures” that “resulted in consumer harm over the course of not just weeks but months, as well as safety and soundness problems like strategic, reputational, legal, and compliance risks.”
Otsuka said “credit unions should be held to the highest standard of member protection, as their core mission is to serve those of modest means.”
NCUA Board Vice Chairman Kyle Hauptman, a Republican appointee, issued nothing.