Marine Corps members and former Frontwave employees said many recruits have no choice but to use the Oceanside-based credit union, which collects significant revenue from overdraft fees. The company’s CEO argues the practice isn’t predatory.
When Marine Cpl. Jesse Leonard got short notice about a promotional board hearing a few weeks ago, he immediately thought about what he needed to wear.
The credit union then sets up checking accounts to receive the recruits’ direct deposits. Marines and former Frontwave employees told KPBS that even when recruits have an existing bank account, they’re instructed to use Frontwave. “The recruits are just an income stream now,” said one former employee. “Frontwave is just not what they used to be.”
Personal finance experts cast doubt on this characterization of overdraft fees as a benefit for service members. The Marine Corps, however, told KPBS in an email that it “encourage new recruits to bring their existing financial institution information to enroll in direct deposit upon arrival to recruit training.” If a recruit does not have their banking information when they enter MCRD San Diego, they’re then automatically enrolled in Frontwave.
The military views the management of personal finances as a measure of moral and professional fitness. Struggles with debt, according to a recent CongressionalWeinstock said Frontwave is capturing recruits at a pivotal — and potentially vulnerable — point in their lives. The contract requires the credit union to provide financial counseling services to recruits. In an email, the Marine Corps said recruits receive education that includes budgeting, checkbook balancing and how to watch out for predatory loans.
KPBS obtained the most recent version of the agreement between Frontwave and the Marine Corps, which was signed in March 2020. The contract raises some potential red flags, said Bill Skimmyhorn, an associate professor at William & Mary's Raymond A. Mason School of Business.Skimmyhorn has researched financial literacy among service members and previously served as an aviator and economist in the U.S. Army.
Birnie notes that a $20 fee is less than what many other banks and credit unions charge. Some financial institutions Birnie, however, bristled at the notion that his company may be leaving young service members in the lurch. “On the teller line, I sat across from Marines who came in fresh from MCRD who were confused about why their vending machine purchases were causing them to be overdrafted by hundreds of dollars,” said one former employee.That’s what happened to Andrew, the 22-year-old Marine. He transferred all of his money from Frontwave to his existing Navy Federal account shortly after leaving boot camp.
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