CFPB: VyStar Hurt Customers With ‘Botched’ Online Banking Rollout

Federal regulators have taken action against VyStar Credit Union following a “botched” online banking launch.

As the Consumer Financial Protection Bureau (CFPB) said in its announcement Thursday (Oct. 31), VyStar in May 2022 switched to a new and “dysfunctional” digital banking platform that made it difficult for members to perform basic banking features for weeks or months on end, leading these customers to incur costs and fees.

“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 regulator 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 CFPB — working with the National Credit Union Administration (NCUA) – has ordered VyStar to make sure all its customers are made whole, and pay a $1.5 million civil penalty to the bureau’s victims relief fund.

In a statement issued to PYMNTS, VyStar said it had responded swiftly to make sure its members did not incur financial harm from the system outage, and that it had “proactively worked in good faith” to address inquiries from regulators.

“During the disruption, members maintained access to their funds and services through VyStar’s extensive network of ATMs and extended hours at both its contact centers and many of its numerous physical branches,” the statement said.

“VyStar has continued to make significant changes, including investments and upgrades to further enhance technical infrastructure, information security and digital services to members.”

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

Those customers found themselves unable to manage their accounts, access their funds or make online bill payments when the new banking system crashed, the bureau said.

In other credit union news, recent PYMNTS Intelligence research has shown that mobile and online banking are consumers’ most-used self-service banking option consumers, with more than 60% of credit union members saying they rely on mobile and online banking the most.

Among younger consumers, around a quarter of Generation Z consumers said they picked their financial institution relationships based on self-service banking convenience.

In separate PYMNTS Intelligence research, 9 out of 10 top performing credit unions recorded an increase in member satisfaction with their mobile app in the past year, while 83% saw an uptick in downloads of their mobile apps.

“For banks, there are benefits in the form of increased customer loyalty and satisfaction, as well as reduced operating costs (fewer walk-ins into the branch for ad hoc queries and calls into call centers),” PYMNTS wrote.