JACKSONVILLE, Fla.—The CFPB has hit VyStar Credit Union with a $1.5-million civil money penalty for the problems created by its new online and mobile banking platforms.
As CUToday.info extensively reported, the $14.6-billion VyStar’s online and mobile banking platforms originally went down on May 14 during a conversion to Nymbus, its new provider and a CUSO in which VyStar has invested $20 million.
The Bureau, in its order, stated that VyStar’s new platform went online prematurely and the CU failed to establish or follow critical processes to ensure its success. The agency termed the problems the CU and its members faced “foreseeable and avoidable.”
The order requires VyStar to come into compliance with the law, establish a governance committee to ensure proper management of projects involving consumer facing banking systems, ensure that all consumers owed redress have been paid, and pay a $1.5-million civil money penalty.
“In May 2022, VyStar attempted to launch a new online and mobile banking platform with a new and untested provider. 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 online and mobile banking platform was taken offline soon after the conversion; and initially when it returned, it lacked key banking services, some of which were not restored for months,” the CFPB said.
'Significant Problems'
The Bureau pointed out that the outage, and subsequent limited functionality of the banking platform, “impacted VyStar members in significant ways,” including the assessment of fees for failures to make timely payments, restricted access to their funds, and the inability to effectively manage their accounts.
“These significant problems were foreseeable and avoidable. VyStar failed to have adequate system development, implementation, and release controls in place; maintained policies and procedures that were deficient, out of date, and not followed by senior management; and was deficient in its service provider oversight,” the CFPB said.
The CFPB said the credit union pushed the conversion process through “too quickly, despite warning signs from its own development team, to meet an unrealistic deadline, which caused VyStar to take on unnecessary risk of harm to its members.”
The Bureau said it found that VyStar’s planning and implementation of the conversion constituted an unfair practice in violation of the Consumer Financial Protection Act of 2010 that caused financial and non-financial harm to VyStar’s members, including fees, costs, and inconvenience.
VyStar Releases Statement
VyStar released a statement to News4JAX saying it has worked transparently with the CFPB and the National Credit Union Administration over the last two years. The credit union said it reimbursed or waived all fees. VyStar also said it paused credit reporting during the outage and voluntarily undertook the response without regulatory prompt.
“We hope the continuous improvements to our online and mobile banking platforms reassures members that we are dedicated to being a responsive organization and emerging from this experience better and stronger,” VyStar President and CEO Brian Wolfburg stated.
NCUA Responds
NCUA reacted to the CFPB’s decision.
“Credit unions must prioritize 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,” NCUA Chairman Todd Harper said. “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.”
“This is a victory for consumers harmed by VyStar’s irresponsible actions,” Board Member Tanya 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. I am proud of the work done by the NCUA to hold VyStar accountable.”
ACU Shares Concerns
America’s Credit Unions Chief Advocacy Officer Carrie Hunt shared ACU's concerns over the CFPB's "unchecked" authority.
"Credit unions strive to meet their members' needs by offering the highest quality, affordable and competitive products and services," said Hunt. "Although sometimes institutions may fall short, causing consumer uncertainty and headaches, credit unions always put their members’ best interest first. The CFPB's enforcement action against VyStar Credit Union stretches its Unfair and Deceptive Acts and Practices authority in a unique way, harshly penalizing the credit union for internal operational actions that ultimately impacted members. We remain committed to pushing back against unchecked CFPB authority."
As CUToday.info reported, VyStar has also been named in a potential class action suit over the issue.