A Virginia state senator is calling on Navy Federal Credit Union to do right by its members after victims of a fraud scheme say they are being forced to repay personal loans they never took out — sometimes with 18% interest.
State Sen. Bill DeSteph, a Republican representing Virginia's 20th District, says he has spoken with Navy Federal leadership multiple times about the issue.
DeSteph said, "There's a crack in the system somewhere that needs to be fixed."
There are many different kinds of schemes that prey on banking institutions.
WTKR has been exposing one scheme has plagued the Hampton Roads region for years.
Watch Previous Coverage: Scam targeting Navy Federal customers costing victims thousands in Hampton Roads
Federal prosecutors have called it the parking lot scam that targets Navy Federal members. In one version, criminals pretend to be in need and ask to use a victim's cell phone, then quickly take out a personal loan and transfer the money to other accounts.
In one case, almost all 10 criminals were sentenced and the indictment stated there were more than 500 victims. Similar cases have been reported across Hampton Roads.
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WTKR have spoken with several victims who say Navy Federal told them they must repay the personal loans — even after reporting them as fraud, some with 18 percent interest.
DeSteph says he also reached out to the Commissioner of Financial Institutions at the State Corporation Commission, the Virginia Credit Union League Association, the Virginia Bankers Association, and the National Credit Union Administration.
"Everyone I've talked to knew it was a problem. Every single one of the individuals at every level knew this was a problem,” said DeSteph.
DeSteph reflects on the conversation he had with leadership at Navy Federal.
"Their response is, well, we're looking into this. We are working with our fraud unit and local law enforcement and law enforcement to crack down on this,” said DeSteph, “But they've not offered up a solution or any relief to the individual or victim of the crime."
Matt Tignor is one of those victims.
"Everything in general with this is just annoying and frustrating. I have tried over and over to tell them to scam. I emailed a bunch of different people," said Tignor.
Watch: Victims warn community after losing thousands in seconds
About a year ago, attorney Gary C. Byler saw the WTKR investigation into the scam and decided to help. He now represents about 50 people who said they have been victimized.
He has filed four individual lawsuits after sending a number of demand letters.
"We sent written demands. We got offers on a couple, we got checks on a couple. We got rejections on a couple, and we got dead silence on the majority,” said Byler.
Byler says he is frustrated with where things stand and said he plans to file more lawsuits if necessary.
"The bottom line is they (the victims) didn't ask for the money, they didn't get a penny and they've reported it to Navy Federal Credit Union — that's the way it's supposed to go. They're now supposed to take the initiative and put this money back in the account. I mean they're charging 18% interest on a fraudulent loan. I am just so glad the folks who talk to me quit paying,” said Byler.
When asked about Sen. DeSteph's concerns, Navy Federal issued us the following statement:
"Due to privacy considerations and pending litigation, we are unable to provide information regarding these matters. Please be assured that Navy Federal takes fraud and scam-related activity very seriously and complies with all applicable laws and regulatory requirements when investigating and resolving such claims. Each claim is evaluated based on its unique facts and circumstances. Navy Federal also cooperates with law enforcement, as appropriate."
DeSteph says that response is not enough.
"I'm disappointed that Navy Federal has not leaned forward on this," he said.
DeSteph said he believes there is a problem with how easy it is to take out personal loans. He said certain credit unions are competing with pay day loans which is creating an environment with not enough checks and balances when the loans are being issued.
He wants to come up with better solutions to this problem to prevent fraudsters from being about to access victim's accounts.
He says he will introduce new legislation if the issue is not resolved, but explained why he would prefer not to go that route.
"It's like if you're being bullied. I'd rather the bully stop than have to go over there and punch the bully in the nose, right? I would rather they step up and do the right thing for their members. These are their members. Navy Federal is owned by its membership. These are the members of Navy Federal. I would hope that they would step up and do what's right for their members. Legal is one level. Doing what's right is a higher standard. Let's do what's right. Let's fix this,” said DeSteph.
