OCEANSIDE, Calif.–In response to a letter from six members of Congress who criticized its overdraft policies and alleged it was hurting young members of the military, Frontwave Credit Union has sent a seven-page letter that counters the accusations that have been made about its offerings and says that to the contrary, it is “intently focused” on serving its members.
As CUToday.info was first to report here, the letter from the members of Congress called Frontwave Credit Union’s overdraft/NSF policies “unconscionable.” The letter was largely based on reporting done by KPBS in San Diego, which has had ongoing coverage of overdraft fees charged by state-chartered credit unions in California ever since the release of a late 2023 report by the state regulator that included a detailed look at income from ODs/NSFs at the institutions.
The California report found Frontwave earned $8 million in 2022 from overdraft fees, or 12% of its overall revenue.
KPBS most recently singled out Frontwave Credit Union for allegedly victimizing “young Marines.” The credit union serves the Marine Corps and Camp Pendleton.
Credit Union ‘Cares Deeply’
In the credit union’s response, sent to Sen. Elizabeth Warren (D-MA), CEO Bill Birnie said the CU’s “leadership cares deeply about our relationship with our Marine members.”
“After all, I served in the Marine Corps for 25 years, retiring at the highest enlisted rank of Sergeant Major, and I remain closely connected to my fellow Marines through my work at Frontwave,” Birnie wrote.
Birnie said the CU’s membership “appreciates” being offered its “Courtesy Pay” option, and that far from what was alleged in the KPBS report and the congressional letter, Frontwave strives to “provide transparency at multiple points in the life of a member's relationship” so that members are “well-informed.”
‘Safeguards’ in Place
Moreover, Birnie said the $1.5-billion Frontwave has safeguards in place, including limits on certain merchant transactions that would otherwise cause multiple overdrafts to occur in a single day and expedited availability of funds from members' paychecks, in order to help our members minimize the need for Courtesy Pay.
“When our members do need to use our Courtesy Pay service, we charge significantly less than the industry average for this service and the cost for our members to use Courtesy Pay has not increased in 13 years,” Birnie said. The letter includes a chart that offers a fee comparison.
After detailing the credit union’s long history with the Marine Corps and military, including its participation in programs he said have saved the Marine Corps more than $100 million to date, Birnie said that prior to the introduction of its Courtesy Pay service, “member transactions would be simply rejected for insufficient funds. As a result, rent payments, car payments, grocery payments, utility payments, etc., would all be rejected, and merchants would charge additional fees to offset the costs of collection of those failed payments. For many, overdraft protection provides a lifeline that bridges the gap between paychecks and covering essential expenses. Without this service, our members would face embarrassing situations, increased fees, disrupted services, and financial insecurity.”
‘Essential Lifeline’
Birnie said Courtesy Pay is an “essential lifeline” that keeps members from turning to “predatory, debt-driven payday lenders that charge excessive interest rates.”
“Our members trust that Frontwave will be there if they need to utilize Courtesy Pay, and they understand the cost of the service,” the letter continues. “Frontwave charges a reasonable - and well below market - fee for the service, which is fully disclosed upfront.”
The letter includes copies of the disclosures provided to members.
“As mentioned above, the Courtesy Pay service cost of $20 is significantly lower than the industry average of $33.58 (2021), $29.80 (2022), and $26.61 (2023) as seen in the following chart from Statista,” Birnie told the members of Congress. “Moreover, Frontwave has not increased the $20 charge in the 13 years since its inception in 2011. Members receive monthly account statements that clearly spell out the number and amount of any Courtesy Pay fees incurred and members have real time access to their account balances on the digital platform.”
‘Affirmative Measures’
Birnie said the credit union also takes “affirmative measures to help limit the number of transactions that require use of our Courtesy Pay,” and said that in February 2024, the credit union “limited merchant chargeback representments to only one per transaction. This is a critical change for our members and significantly limits the potential for account overdrafts. For example, some merchants, such as gyms, will make repeated representments for payment, but the limitation to only one representment acts to minimize the charges to the member.”
During 2023, Birnie said Frontwave also forgave over $385,000 in Courtesy Pay service fees.
Overall, satisfaction with its offerings has contributed to “strong membership loyalty,” Birnie wrote.
“The Courtesy Pay service is a fully disclosed opt-in program for our members. The percentage of our membership who take advantage of the Courtesy Pay service is in alignment with the larger financial services industry,” the letter states. “In 2023, 22% of our membership utilized the Courtesy Pay service, and less than 5% of our members utilized the service 12 times or more. Of our members that used the Courtesy Pay Service an average of one time per month, 39% are from the community and are not Marine Recruits. Of those who used the Courtesy Pay service the most, roughly half were from our community membership (46.6%). In other words, our Marine Members are far from the only ones who use this important service.”
‘Practical’ Education
Noting Frontwave has a high percentage of young, low-income and financially inexperienced members, Birnie said Frontwave employs certified financial counselors who provide “practical personal financial education,” and that during 2022 it provided financial education to more than 51,000 people, members and non-members alike.
“Contrary to some of the allegations made against Frontwave, we provide two thorough 60-minute financial education classes for all Marine recruits on the account particulars, how pay deposits work, Frontwave's Schedule of Fees & Charges, Frontwave's Account Disclosures and Agreement, debit card usage, courtesy pay/overdraft protection, account alerts, credit reporting, online and mobile account access and capabilities, how to save money, keys to building responsible credit, among a wider range of topics,” the letter states.
‘Intently Focused’
He said the training materials “explicitly highlight and describe the Courtesy Pay service.”
“We are intently focused on serving our unique membership and strive to continuously improve in these areas-and in others-every day,” Birnie concluded. “We frequently evaluate our programs to make sure we are providing value to our members including efforts to communicate, educate, and highlight alternative solutions and tools that are in the best interest of our membership.”
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