Federal regulators said Tuesday Bank of America was withholding benefits that had been promised to it by some credit card customers, double charging overdraft fees, and surreptitiously extorting customers without their knowledge or consent. He announced that he had opened a card account under his name.
The Currency Regulator, which oversees the banking industry, and the Consumer Financial Protection Bureau fined the country’s second-largest bank $150 million over what it called a “junk fee” that it charged its customers. imposed. Improper handling of customer accounts. Some customers had him paying $35 multiple times in overdraft fees on one of his transactions that he requested from an underfunded account.
As part of the Department of Consumer Affairs’ action, the bank reimbursed more than $80 million to customers who were fraudulently charged fees or denied sign-on bonuses, and opened cards in their name without their knowledge. Customers will also be compensated.
The practice came to light as part of a 2022 President Biden-ordered industry-wide investigation into the fees companies charge their customers. Bank of America will phase out the practices described in Tuesday’s action in 2021 and 2022, regulators said.
“These actions are illegal and undermine the trust of our customers,” consumer affairs director Rohit Chopra said in a statement. “The CFPB will put an end to these practices throughout the banking system.”
Regulators said Bank of America imposed inappropriate overdraft fees by double-charging customers for the same transaction. The first charge is a $35 “insufficient funds” fine for customers who attempt to pay for something by check or automated transaction without having the required funds. The transaction will be declined, but if the merchant trying to collect the money resubmits the payment request, the money will be processed and the customer’s account will either be charged another $35 overdraft fee, or You will be rejected. A second “insufficient funds” fee will be charged.
A Bank of America spokeswoman said the bank had “voluntarily” lowered overdraft fees from $35 to $10 in early 2022 and eliminated the $35 “insufficient funds” penalty. Since then, revenue from such fees has dropped by 90%, a spokeswoman said.
In addition to the regulators’ joint action on overdraft fees, the Department of Consumer Affairs said it had found two other areas where banks allegedly mistreated customers. For some customers solicited to open a new credit card account, Bank of America failed to offer the enrollment bonus promised to customers who opened their accounts over the phone or in person rather than online. This was revealed by the agency’s investigation.
The agency also found several instances of Bank of America employees opening new cards in customers’ names without their knowledge or consent to meet sales targets. Stated.
According to the Department of Consumer Affairs, these fake accounts appear to represent a “small percentage” of new accounts at Bank of America. By comparison, such practices were widespread at Wells Fargo, leading to years of investigation by federal and state officials, resulting in billions of dollars in fines.
The regulatory action represents a significant move against a single institution over “junk fees,” but not the largest. The Department of Consumer Affairs filed a $3.7 billion lawsuit against Wells Fargo in December over such fees, making it the largest lawsuit ever filed against a bank. In September, the agency ordered medium-sized lender Regions Bank to pay $50 million to a victim relief fund and refund $141 million in overdraft fees to its customers.
The banking industry has recently tried to get ahead of regulatory crackdowns on customer fees. Several major US banks have announced changes to their overdraft policies for late 2021 and early 2022. Industry groups have since argued that the bank-initiated change means no new laws or regulations governing overdraft fees are needed.
“These reforms by the country’s largest banks have been implemented without regulatory or legislative intervention and represent a transformative moment for the industry as a whole,” said Lindsay Johnson, president of the consumer banking association, a lobbying group. said. I have written In a September Opinion article.
