U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Armed Services Subcommittee on Personnel, has written to Secretary of the Department of Defense (DoD) Pete Hegseth, urging him to freeze the Marine Corps contract renewal with Frontwave Credit Union. The call comes as Senator Warren pushes for the contract terms to be revised to adequately protect Marines from abusive overdraft fees. This action follows a bipartisan investigation launched last year by Senator Warren and nine other members of Congress into the California-based credit union concerning its history of targeting Marine recruits with excessive overdraft fees.
For 25 years, Frontwave Credit Union has maintained an exclusive agreement with the Marine Corps. This arrangement funnels recruits from the Marine Corps Recruit Depot (MCRD) in San Diego, automatically enrolling approximately 99% of them in Frontwave checking accounts to receive their paychecks via direct deposit.
In March 2024, a KPBS investigation brought to light Frontwave’s concerning practices. It found that if a Marine’s account is overdrawn by more than $20, they are subsequently charged a $20 per-purchase fee. These fees can rapidly accumulate, potentially totaling as much as $500. Considering the 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 could be disastrous for their credit score.
Financial data further underscores the issue: in 2022 alone, Frontwave generated $7.8 million from overdraft and non-sufficient funds (NSF) fees. This revenue source accounted for Frontwave’s entire profit that year, tripling the average for state-chartered credit unions and indicating that without this income, the credit union would have faced significant losses for years.
Senator Warren’s investigation uncovered that the average overdraft fees for Frontwave customers who incurred them easily exceeded $200 annually. Frontwave also confirmed to Senator Warren that its contract with the Marines did not include any terms specifically related to overdraft fees.
“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 Senator Warren.
Senator Warren concluded, “The findings [of my investigation] indicate a need for DoD to review its contract with Frontwave Credit Union…and ensure that they have adequate protections in place to prevent excessive overdraft fees and other abusive practices.”
Senator Warren urged Secretary Hegseth to commence this review process promptly and to provide her staff with a briefing on the DoD’s efforts to protect Marines from predatory overdraft fees within 30 days.