CFPB Slaps VyStar Credit Union With $1.5million Fine After Failed Rollout ‘Left Customers Stranded’

US government agency, the Consumer Financial Protection Bureau (CFPB) has fined Florida-headquartered VyStar Credit Union $1.5million for failing to protect consumers during its ‘botched’ rollout of a new online banking system. 

In May 2022, VyStar transitioned to a new virtual banking platform which made it difficult for its members to perform basic banking functions for several weeks. Its new system crashed upon launch, forcing VyStar to quickly take the platform offline.

Upon bringing the system back online, the new platform lacked key banking services, with some features unavailable for longer than six months, ultimately incurring many customers unexpected fees and costs. 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.

Now, CFPB is taking action to ensure VyStar refunds its members for all fees charged as a result of the outage and reimburses any outstanding third-party fees or costs, including interest costs, imposed on members as a result of the outage.

“VyStar and its senior management bungled the credit union’s rollout of a new banking system and left customers stranded without online access to their accounts,” explained Rohit Chopra, director at CFPB. “VyStar’s careless errors inflicted financial harm on their credit union members.”

VyStar must also pay a $1.5 million civil penalty to the CFPB’s victims relief fund. Finally, CFPB is ordering VyStar to create contingency plans for all future updates to its banking systems which include sufficient customer service resources to address consumer problems, and ensure upgrades and maintenance for consumer-facing banking systems are performed promptly.

Damage limitation

This action comes following CFPB’s close partnership with the National Credit Union Administration (NCUA). The CFPB found that VyStar violated the Consumer Financial Protection Act, specifically by depriving consumers of access to money and accounts, ignoring red flags rushing a new platform online without appropriate testing. The CFPB and the NCUA worked to contain the fallout from VyStar’s misconduct.

“Credit unions must prioritise their members, yet Vystar’s due diligence fell far short of what was required for completing a successful conversion of the credit union’s mobile and online banking platforms,” said Todd M. Harper, chairman at NCUA. “These management failures 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.”

VyStar, formerly known as JAX Navy Federal Credit Union, is one of the largest credit unions in the country, with approximately $14.75billion in total assets and over 980,000 members.