Federal regulators said Tuesday that Bank of America withheld promised benefits from some of its credit card customers, doubled overdraft fees and secretly opened card accounts in customers’ names without their knowledge or consent. .
The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, which oversees the banking industry, filed a $150 million fine against the nation’s second-largest bank for “junk fees” it was charging customers, as well as Mismanagement of accounts. Some customers paid as much as $35 in overdraft fees multiple times on a single transaction requested from an account with insufficient funds.
As part of the consumer bureau’s crackdown, the bank will pay more than $80 million to customers who were improperly charged or denied sign-on bonuses, and will compensate customers whose information in their names The cards were opened without
The practices came to light in 2022 as part of an industry-wide investigation by President Biden into the fees companies charge customers. Bank of America has plans to phase out the practices described in Tuesday’s actions in 2021 and 2022, according to regulators.
“These practices are illegal and undermine consumer confidence,” Rohit Chopra, director of the consumer bureau, said in a statement. “The CFPB will put an end to these practices in the banking system.”
Regulators said Bank of America charged customers with unfair overdraft fees by charging customers twice as much on the same transaction. The first charge would be a $35 “insufficient funds” penalty levied against a customer who attempted to pay for something by check or automatic transaction without the necessary funds to do so. The transaction will be declined, but if the merchant trying to collect the money submits a request for payment again, the money will be gone and another $35 will be charged to the customer’s account, this time as an overdraft fee. in, or it will be denied again, incurring a second “insufficient funds” charge.
A Bank of America spokeswoman said the bank had “voluntarily” reduced overdraft fees from $35 to $10 in early 2022 and eliminated its $35 “insufficient funds” penalty. The spokesperson said that since then the revenue from such fees has seen a drop of 90 per cent.
In addition to the simultaneous crackdown on overdraft charges by both regulators, the consumer bureau said it discovered two other areas where the bank was mistreating customers. To some customers who were enticed to open new credit card accounts, the bureau found that Bank of America did not provide a sign-up bonus to customers whom it encouraged to open accounts over the phone or in person rather than online. I promised.
The bureau also said it has uncovered some instances of Bank of America employees opening new cards in customers’ names without their knowledge or consent in order to meet sales targets.
According to the Consumer Bureau, these fake accounts appear to make up only “a small percentage” of new Bank of America accounts. By comparison, such practices were widespread at Wells Fargo, leading to years of investigations by federal and state authorities that resulted in billions of dollars in fines.
The regulators’ actions represent a significant move against a single institution over “junk fees,” but not the largest. In December, the consumer bureau brought its largest ever action against a bank with a $3.7 billion case against Wells Fargo over such fees. In September, the bureau ordered Regions Bank, a medium-sized lender, to pay $50 million to victims’ relief funds and refund $141 million in overdraft fees to its customers.
The banking industry has recently been trying to fend off regulatory action on customer fees. Several of the largest US banks announced changes to their overdraft policies for late 2021 and early 2022. Trade groups later argued that the changes made by the banks themselves meant that no new laws or regulations governing overdraft fees were necessary.
“These reforms of the nation’s largest banks have occurred without regulatory or legislative intervention and collectively represent a transformative moment for the industry,” said Lindsay Johnson, president of the Consumer Bankers Association, a lobbying group. wrote In an opinion article in Sept.
