Members of Congress have launched an investigation into Oceanside-based Frontwave Credit Union, in response to KPBS reporting last month that revealed the credit union collects millions in overdraft fees from young Marines every year.
“Frontwave owes service members and the American public an explanation for its deeply exploitative overdraft practices that harm service members and their families,” the letter states.
The letter is signed by a bipartisan group of lawmakers that includes U.S. Sens. Elizabeth Warren (D-MA), Bernie Sanders (D-VT), Cory Booker (D-NJ), JD Vance (R-OH) and San Diego Democratic Rep. Sara Jacobs (CA-50). You can read a copy of the letter here.
KPBS wants to hear from you
Are you a Marine who's gotten overdraft fees from Frontwave? Or do you have information about the credit union's overdraft practices? Contact reporter Scott Rodd at srodd@kpbs.org.
KPBS’s investigation revealed how Marine Corps recruits — upwards of 15,000 every year — are systematically enrolled in Frontwave when they come through boot camp in San Diego. The credit union then sets up checking accounts to receive the recruits’ direct deposits.
Marines make up the majority of Frontwave’s members, and the credit union relies on overdraft fees as a key source of income. In 2022, the company collected about $8 million in overdraft penalties, according to data collected by the state
Members of Congress called Frontwave’s overdraft practices “unconscionable” and urged the company to change its fee policies. The lawmakers expressed concern about the harm excessive overdraft fees can cause service members — some of whom enter boot camp at 17-years-old and may be away from home for the first time.
“KPBS revealed that Frontwave Credit Union has for over two decades preyed on Marine recruits,” the letter states.
The letter demanded answers in response to more than a dozen questions about the credit union’s reliance on overdraft fees for income, its enrollment of Marine recruits and the safeguards it affords customers.
Frontwave CEO Bill Birnie declined an interview request. In an email, he said the company would respond to the lawmakers’ questions by their May 10 deadline. In a previous interview, Birnie described the fees as a “courtesy” to customers and said as a former Marine, he would never exploit service members.
Warren spearheaded the letter in order to “start an investigation” into Frontwave.
“We were concerned that young Marine recruits are just plain being cheated by this credit union,” said Warren in an interview with KPBS. “If they are in compliance with current law, I want to talk to regulators about why current law would permit actions like this.”
Additional signers of the letter include Sen. Laphonza Butler (D-CA); Sen. Richard Blumenthal (D-CT); Sen. Benjamin Cardin (D-MD); Sen. Tim Kaine (D-VA); and Sen. Mazie Hirono (D-HI).
Aaron Klein, a senior fellow in economic studies at the Brookings Institution, said the investigation launched by members of Congress could lead to significant changes at Frontwave.
“This letter is a big deal, and it's tough,” he added. “This is going to get some senior brass on the military side quite focused — I suspect that this exclusive arrangement (between Frontwave and the Marine Corps) doesn't have much longer to go.”
Frontwave’s systematic enrollment of recruits stems from an exclusive arrangement between the credit union and Marine Corps. The 25-year-old agreement funnels recruits into the credit union when they come through boot camp at the Marine Corps Recruit Depot (MCRD) in San Diego.
The $8 million Frontwave collected from overdraft fees in 2022 represented nearly 12% of its overall revenue — about triple the average among all state-chartered credit unions. The credit union’s financial records show it easily could have lost money in recent years without income from overdraft fees.
Last month, the Marine Corps told KPBS that recruits can choose where to send their direct deposits if they bring their bank account information to boot camp. But former employees said nearly all the recruits who come through MCRD San Diego are signed up for Frontwave. Members of the Marines told KPBS they were instructed to use Frontwave when they went through boot camp, even if they asked to use a different bank account.
In an email Thursday, the Marine Corps said it is working with recruiters to ensure recruits understand how to enroll in the bank of their choice when they enter boot camp.
Warren, who is a member of the Senate Committee on Armed Services and chairs the Subcommittee on Personnel, said Frontwave’s practices fit a long, troubling pattern.
“This is just one more example of a financial institution homing in on young, vulnerable service members,” she said. “It's like they're caught in a net and just can't make it back out.”
Warren has long criticized financial institutions’ reliance on overdraft fees, which disproportionately weigh on lower-income consumers.
“But for our young military (members) who are there to serve us, that just makes it doubly, triply wrong,” she added.
