VyStar Credit Union To Pay A $1.5 Million Fine For Botched System Switch

The Consumer Financial Protection Bureau (CFPB) recently ordered VyStar Credit Union to pay a major $1.5 million fine over a bungled online banking rollout. 

VyStar Fined For A Two-And-A-Half Years Old Incident

VyStar Credit Union was supposed to perform a system switch, but something went wrong, and its customers were left unable to access their accounts and money. The incident is not new, as it took place in May 2022, when VyStar transitioned to a new dysfunctional online banking platform.

The move disrupted credit union members, making them unable to perform basic banking functions for weeks. Some features were even left unavailable for over six months. As a consequence, numerous customers suffered from various side effects of the incident. Families incurred fees and costs due to these problems.

It did not help that VyStar is one of the largest credit unions in the country, holding more than $14.75  billion in total assets. The financial institution has more than 980,000 members. 

Now, two and a half years later, the CFPB has ordered VyStar to make sure all of its affected customers are made whole. In addition, the company has to pay a $1.5 million civil penalty to the victims relief fund run by the regulator.

VyStar Tried To Launch The Platform Before It Was Ready

Commenting on the incident, CFPB director Rohit Chopra stated that VyStar and its senior management bungled the credit union’s rollout of a new banking system. As a direct consequence of their actions, customers were left stranded without online access to their accounts. 

This is viewed as carelessness from VyStar’s side, especially since its credit union members suffered financial harm as a result of the firm’s actions.

What actually happened was that the new system crashed as soon as it launched, since VyStar apparently brought it online prematurely. Its development team insisted that it wasn’t ready and it warned the company against proceeding with the move. Not only that, but the company also failed to establish or follow critical processes to ensure its success, according to Chopra.

Soon after launch, the platform was taken offline, when it became clear that it could not get easily fixed. But, after the system was brought back online, key banking services were made unavailable and, as mentioned, some of them remained absent for months.

National Credit Union Administration’s Chairman, Todd M. Harper, also commented on the incident, saying that “Vystar’s due diligence fell far short of what was required for completing a successful conversion of the credit union’s mobile and online banking platforms.”

Harper also said that the management failures resulted in consumer harm over the course of not just a few weeks, but months. Not to mention endangering user safety that issues like strategic, reputational, legal, and compliance risks have brought.