If you’re not knowledgable you may unknowingly be branded with a “Do not approve for any product, for any reason…FOREVER” Scarlett Letter by Navy Federal Credit Union. I know this because it happened to me. I had a 3,000 credit card with Navy Federal Credit Union from back in the early 2000s. Through a bad divorce and job loss I had fallen behind on most all of my account to include my Navy Federal Credit Union card. It was subsequently charged off as bad debt sometime between 2007 and 2010. My checking and savings accounts that I had at that time were also all closed (I’ll assume for non activity for several years). In 2013 I filed for bankruptcy protection (in hindsight one of the worst things I’ve ever done in my life, but I didn’t know any better at the time) and that old card that had been charged off and closed for years was also included in that procedure. Here’s what I didn’t know.
If you have a credit account with Navy Federal Credit Union (NFCU) and you include that credit account in a bankruptcy, Navy Federal Credit Union will, in perpetuity, mark you account as an account that can never participate in any other services with the company…ever. There is no expiration. There is no road to redemption. It is “policy” and there is no one that can do anything about it. You are forever banned…well…sort of.
You see the conundrum is that you are still allowed to carry a checking or savings account with the institution. So you can deposit funds and use those funds as you please. Financial institutions can loan out $10 for every $1 they have on deposit, so it’s in their financial interest to keep as many customers on the books as possible that can add to their deposits so that they can make more money loaning those funds out.
Between filing for that bankruptcy and now (2017) my life has taken a full 180 with the biggest change being teaching myself how to write software and working my way within that industry to making well over 200K per year. This has turned my financial life around and I’m going back and righting old financial wrongs.
That being said, about a year ago (2016) I contacted Navy Federal Credit Union to see if I can get another account there. I was able to do so and found that I still had my same old member number from more than a decade prior and to all appearances I was back in business. In retrospect I found that once you’re banned, you can stay on their deposit rolls for their benefit but you are not allowed to use any of their services to YOUR benefit.
You can not do any of the following:
Open a business account…ever=> No
Get an auto loan…ever => No
Get another credit card…ever => No
Get a mortgage…ever => No
Get a personal load…ever => No
Get a student loan…ever => No
Get a Home Equity Loan…ever => No
Get a motorcycle loan…ever => No
Get a boat loan…ever => No
Get any other type of loan…ever => No
Every time you log into your mobile account you’ll see this
I contacted them about this and this was the exchange.
Also know that while the notice/warning is very upfront and “in your face”, the flagging of your account for rejection is not. You are not blocked from “applying” for any of the products that Navy Federal Credit Union offers. I found out that I was banned when I applied to open a business checking account for one of the LLCs that I own. I was able to apply and got pretty far down the road to opening the account to only be told that my application was denied. When I inquired as to why, the first customer service person wasn’t sure and had to do some digging. Turns out that it was due to that old 3,000 credit card from a decade ago. I was told that no business that I owned or better yet that I was associated with at the officer/executive level could ever open an account at Navy Federal Credit Union.
I offered to pay back the 3,000 dollars that was charged off as I’m now in the financial shape to be able to do so and was told that I wasn’t allowed to do that. Shortly there after I embarked on purchasing my first home and once again went to Navy Federal Credit Union to apply for a mortgage. I was able to apply for the loan but was soon told that I was again denied because of that old credit card account that I could now do nothing about. I ended up going with USAA for my mortgage instead without any issues.
I inquired for my case to be escalated, basically so that I could talk to someone that could do something about this and was assigned an escalation specialist. She called me and listened to my story and told me to give here a few days to look into the issue and that she’d get back to me. She called me back in a couple of days and basically proceeded to tell me all of the things that the regular customer service agent said about “policy” and there not being anything that can be done. I was pleasant with her and told her “ok I understand” mostly because I was exhausted with the whole situation and was in the middle of purchasing my home so it wasn’t a priority at that time.
A couple of issues that I have with “denial purgatory” is two fold.
- If an account is flagged as “auto deny any services applications” then Navy Federal Credit Union should turn off the application process for that account. Disable the buttons, or better yet don’t even show the option to apply for any service in which you will automatically be denied. This leads to # 2.
- Because you’re allowed to apply for services that you’ll be auto denied for, you can end up picking up unnecessary hard inquiries on all three of your credit reports. My credit was pulled for the mortgage application even though the system knew that there was no chance of me being approved for a mortgage at the time that I put in the application. This negatively affects the consumer as a hard pull on your credit report will lower your credit score and can subsequently prevent you from qualifying for other products and services with other vendors.
As a software developer, I feel comfortable saying that #1 should be fairly easy. They obviously have some kind of flag on a users account that once turned on triggers the “You have had a bankruptcy at some point in your past” red warning in the mobile app and the mobile app should be using the same database as the web app so you should have access to that same flag in the web app to use to disable services applications.
I say either fix the issue with allowing banned members to apply for services that they no longer qualify for, or create some road to redemption for banned members to qualify for those services.