The Navy Federal Credit Union has effective TV commercials, but it has been ordered to halt illegal and misleading practices.

The television commercials for Navy Federal Credit Union are so effective and sincere, you’d never know it’s an operation marked by mendacity, sham and deceit.

Before you get suckered in by the spot with the cute little Pomeranian kissing the big gruff Marine, find out why the Consumer Financial Protection Bureau (CFPB) ordered Navy Federal to pay its victims $23 million and a $5.5 million penalty for shady debt collection activities.

In a consent order issued Tuesday, CFPB presented a litany of offenses by Navy Federal, including violating the law by blocking debit cards, ATM machines and online accounts, and making empty threats to contact clients’ military superiors about overdue debts. The credit union also intimidated customers with false threats to garnish wages.

The only thing worse than an empty threat is a real one. But empty threats can take a toll, too, generating tension, stress and fear. Not all the threats were bogus, however. The credit union disabled electronic access for about 700,000 accounts after customers fell behind on credit payments.

Navy Federal, based in Vienna, Va., and the nation’s largest credit union with assets over $73 billion, serves members of the military, Defense Department employees and contractors, other government employees assigned to the department, and their immediate families.

Rather than following the “honest performance of duties” promised in Navy Federal’s code of ethics, the credit union repeatedly deceived its members about punitive actions they might suffer if they failed to make payments between January 2013 and July 2015.

“Navy Federal Credit Union misled its members about its debt collection practices and froze consumers out from their own accounts,” CFPB Director Richard Cordray said in a news release. “Financial institutions have a right to collect money that is due to them, but they must comply with federal laws as they do so.”

In response to the order, Navy Federal issued a self-serving news release that largely ignored the CFPB findings. “We have a long history of helping members when they are making the effort to pay back their loans, and we will continue to do so,” it said. “Where our Collections practices have come up short in the Consumer Financial Protection Bureau’s estimation, we have made all the necessary changes.”

Navy Federal did not admit wrongdoing in that statement, nor in its signed agreement with CFPB. But in the document signed by Cutler Dawson, Navy Federal’s president and chief executive, the credit union agreed “that the facts described in Section IV of the Consent Order will be taken as true.”

Among the 79 findings in that section, CFPB said Navy Federal:

  • Presented “deceptive representations to hundreds of thousands of consumers.”
  • Used letters “that were likely to mislead reasonable consumers.”
  • Sent letters that “constitute deceptive acts or practices in violation” of the law.
  • “Made statements that were likely to mislead consumers over the telephone.”

No credit union executive or staff member was punished for the many transgressions or even tutored on proper conduct, according to the order. It said Navy Federal “lacks documentation that any employees were disciplined, reprimanded, or subject to additional training.”

CFPB does not conduct criminal investigations or prosecute criminal charges, but it can refer matters to law enforcement officials. The bureau would not say if that was done in this case.

CFPB, however, can compel enforcement actions, such as the $23 million it ordered “in compensation to consumers who received threatening letters.” About 200,000 people will split that money. “In addition, all consumers who received the letter threatening to contact their commanding officer will receive at least $1,000 in compensation,” the bureau said.

Meanwhile, the same day that the CFPB’s order was released, a federal appeals court ruled the agency’s structure is unconstitutional, but did not order operations to cease.

CFBP told Navy Federal to halt “any misleading, false, or unsubstantiated threats to contact a consumer’s commanding officer, threats to initiate legal action, or misrepresentations about the credit consequences of falling behind on a Navy Federal Credit Union loan,” according to the CFPB news release.

The credit union also was told it “cannot block its members from accessing all their accounts if they are delinquent on one or more accounts.”

Despite the long list of offenses presented by CFPB, the credit union’s statement said “Navy Federal Credit Union has been nationally recognized for its exceptional service to members. We remain steadfastly focused on upholding our standards of service excellence and the trust of our membership.”

That reputation and trust are severely damaged now.

Read more:

[Federal appeals court rules the structure of CFPB is unconstitutional]

[Consumer Financial Protection Bureau wants to give David a bigger stone to sling at Goliath]

[Military members have twice the bill collector complaints]