Marine Corps renews contract with Frontwave Credit Union, despite scrutiny from US lawmakers

Last week, U.S. Sen. Elizabeth Warren called on the Marine Corps to pause renewing its contract with Oceanside-based Frontwave Credit Union, after the company came under scrutiny for collecting millions in overdraft fees from Marines.

“Frontwave owes service members and the American public an explanation for its deeply exploitative overdraft practices that harm service members and their families,” the Massachusetts Democrat stated in a letter to the U.S. Department of Defense.

Warren’s warning, however, went unheeded. KPBS recently confirmed the Marine Corps has renewed its contract with Frontwave. A Marine Corps spokesperson declined to provide a copy of the new agreement; KPBS has submitted a Freedom of Information Act request to obtain it.

Warren declined to comment through a spokesperson on Monday.

Members of Congress began looking into Frontwave last year following an investigation by KPBS.

Frontwave’s exclusive arrangement with the Marine Corps goes back decades. About 20,000 Marine recruits go through boot camp at the San Diego Marine Corps Recruit Depot (MCRD) every year. In order to process their paychecks, the Marine Corps has funneled many of those recruits into Frontwave.

KPBS found the credit union collects millions in overdraft charges from the young Marines and other members every year and relies on the fees as a key source of revenue. Last year, the credit union collected more than $8 million in overdraft penalties, according to data collected by the state.

Frontwave CEO Bill Birnie previously acknowledged that overdraft fees are “an important source of income” for the company, but emphasized the practice was not predatory.

“We're providing a service that gives (customers) what they need to get through the month,” Birnie said of Frontwave’s overdraft program.

Marines and former Frontwave employees told KPBS that recruits were instructed to use Frontwave for their direct deposits during boot camp, even if they already had an existing bank account elsewhere.

In an email, Marine Corps spokesperson Captain Austin Gallegos said recruits are encouraged to bring their banking information to boot camp at MCRD if they want to use an existing account for direct deposit. Otherwise, they are automatically signed up for Frontwave.

“Recruits are afforded the opportunity to change to a (different) financial institution once they have the necessary information to change their direct deposit,” Gallegos said.