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Warren calls on Defense Department to review Frontwave Credit Union’s contract with Marine Corps

Massachusetts Democratic Sen. Elizabeth Warren is calling on the U.S. Department of Defense to scrutinize a long-standing exclusive arrangement between Frontwave Credit Union and the U.S. Marine Corps.

“Frontwave confirmed that it charged service members expensive and abusive overdraft fees for years, which run up to $100 per day,” Warren said in a statement. “The Department of Defense should review its agreement with Frontwave to make sure that service members are not being ripped off.”

In March, KPBS published an investigation detailing how the Oceanside-based credit union systematically enrolls thousands of new Marine recruits each year when they come through boot camp.


The nonprofit company relies on overdraft penalties as a key revenue source. In 2022, Frontwave collected $7.8 million in overdraft fees, according to the latest data collected by the state. Much of that money came from the pockets of young service members.

Following KPBS’s reporting, 10 members of Congress launched an investigation into Frontwave, calling the company’s practices “unconscionable.” They sent a list of questions to the company and gave it until May 10 to provide answers.

Frontwave CEO Bill Birnie responded with an eight-page letter. But Warren, who spearheaded the investigation, wasn’t satisfied. The response addressed some of lawmakers’ questions, but ignored key requests for information.

“The credit union still owes Congress and the public answers about exactly how much it collects each year from these tactics,” Warren said in a statement.

In an email, Birnie declined to comment beyond what is stated in the letter.


Key questions unanswered

Birnie’s letter answered lawmakers’ questions about how it informs customers of its overdraft program, the types of transactions that may incur overdraft fees and whether Marine recruits in boot camp receive financial counseling.

But the company left a number of other key questions unanswered. For example, it ignored a request from the lawmakers for the total dollar amount of overdraft fees paid by service members.

The company also failed to provide some of the documents requested by Congress members.

The lawmakers also requested a narrative explanation of how Frontwave first secured its agreement with the Marines over 25 years ago. The agreement guarantees Frontwave thousands of new customers each year.

Birnie’s explanation was light on details, stating simply that the Marine Corps Recruit Depot in San Diego “approached us in 1996 to participate in the Recruit Direct Deposit” program. The agreement has been renewed every five years since then. The letter does not state whether the agreement ever went through a competitive bidding process.

Fuzzy math

Much of Birnie’s letter focused on Frontwave’s decadeslong history and touted the company’s accomplishments. But the letter leaves out some key details and at times relies on dubious numbers.

The CEO described how the Frontwave Foundation, a charitable organization funded by customer and community member donations, “has made significant donations to veterans’ associations and local charities as part of its mission to empower and improve the lives of our community.”

The letter does not mention that the foundation was launched in November 2023. Neither does it state that the foundation’s charitable donations last year totaled a mere $32,500, which KPBS determined through its financial statements. That represents less than half of 1% of the $8 million in overdraft fees the company collected in 2022, the most recent year its overdraft totals are publicly available.

Birnie’s letter also boasts about the financial counseling the credit union provides to service members and the community. He claims that Frontwave provided “34,405 hours of instruction” to Marine recruits in 2023.

KPBS confirmed with Frontwave how it arrived at the large number. The credit union provides two hours of financial counseling to every Marine recruit when they go through boot camp. Roughly 17,000 recruits came through boot camp in San Diego last year. Frontwave multiplied the two-hour training by the total number of recruits.

The letter also touts Frontwave’s retention of members. The credit union acknowledges that 62% of its Marine members leave the credit union after four years — but the company argues this number is actually “impressive,” since Marines move around a lot.

KPBS spoke to many young Marines based in the San Diego area who said they left Frontwave shortly after leaving boot camp. Several said they left because of the overdraft fees or poor service.

Multiple former Frontwave employees told KPBS that customer retention was a persistent issue at the company.

Corrected: May 20, 2024 at 10:30 AM PDT
A previous version of this story incorrectly stated the number of members of Congress who launched an investigation into Frontwave.