WASHINGTON—Sen. Elizabeth Warren (D-MA) is asking the Department of Defense (DoD) to freeze a contract between the U.S. Marine Corps and $1.5-billion Frontwave Credit Union due to what she is calling “excessive” overdraft fees.
Warren, ranking member of the Senate Armed Services Subcommittee on Personnel, wrote to Secretary of the Department of Defense Pete Hegseth Wednesday making the request.
As CUToday.info reported, last year, Warren launched a bipartisan investigation with nine members of Congress into the Oceanside, Calif.-based credit union for what Warren’s office stated is a “history of targeting Marine recruits with excessive overdraft fees.”
“For 25 years, Frontwave Credit Union has had an exclusive agreement with the Marine Corps that funnels recruits from the Marine Corps Recruit Depot (MCRD) in San Diego and automatically enrolls them in Frontwave checking accounts to receive their paychecks by direct deposit. Approximately 99% of MCRD recruits were automatically enrolled with Frontwave,” Warren’s office stated.
In March 2024, a KPBS investigation exposed Frontwave’s “predatory practices,” finding that every time a Marine’s account is overdrawn by more than $20, they are charged a $20 per-purchase fee – with fees that can run as much as $500 in total, Warren’s office stated.
“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,” Warren’s office contended.
“In 2022 alone, Frontwave made $7.8 million from overdraft and non-sufficient funds 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,” Warren’s office stated.
Warren’s office stated Warren’s investigation found the average overdraft fees for Frontwave’s members who were subject to these fees exceed $200 annually.
“Frontwave confirmed to Senator Warren that its contract with the Marines did not contain any terms related to overdraft fees,” Warren’s office stated.
“New information and documents I obtained as part of my investigation of Frontwave reveal that the Department of Defense does not adequately protect service members from exorbitant overdraft fees in its contracting process,” said Warren.
America’s Credit Unions Responds
In response to Warren’s letter, America’s Credit Unions President/CEO Jim Nussle pointed out credit unions have long worked with military members and families to educate and provide services.
“The credit union industry is committed to ensuring our servicemembers have a trusted place to turn during financial hardships and a partner to thrive during service and beyond,” Nussle said Defense credit unions are invested in the financial well-being of their members, and their collective services offered to educate members and help them achieve financial milestones are a huge benefit to the strength of our country,” Nussle said. “Credit unions have long worked with the DoD to provide services on military bases. The industry trusts that the DoD also works in the best interest of the military as it selects partners to support financial readiness.”
ACU noted that credit unions have provided financial services on U.S. military bases since 1928 and on overseas DoD installations since 1967. A 2006 Federal Credit Union Act amendment affirmed the DoD discretionary authority to afford space on military bases at a nominal rate to credit unions.
The Defense Credit Union Council President and CEO Anthony Hernandez said DCUC “stands firmly with all credit unions that operate with transparency, compassion, and an unwavering commitment to those who serve. We remain ready to work with Congress and DoD leadership to ensure continued access to safe, reliable, and member-owned financial services on military installations across the globe."
CUToday.info has reached out to Frontwave for comment.