Federal regulators said Tuesday that Bank of America is withholding promised privileges from some credit card customers, double overdraft fees, and secretly opening card accounts in customers’ names without their knowledge or consent.
The Office of the Comptroller of the Currency and the Office of Consumer Financial Protection, which oversees the banking industry, fined the nation’s second-largest bank $150 million for what they called “unwanted fees” it was charging customers, as well as mishandling customer accounts. Some customers paid $35 overdraft fees multiple times in a single transaction that they requested from an account with insufficient funds.
As part of the Consumer Bureau’s action, the bank will reimburse more than $80 million to customers who were incorrectly charged or denied sign-on rewards, and will reimburse customers who unknowingly opened cards in their names.
These practices emerged as part of an industry-wide examination, ordered by President Biden in 2022, of the fees companies charge customers. Bank of America ended the practices described in Tuesday’s actions in 2021 and 2022, according to regulators.
“These practices are illegal and undermine customer confidence,” Rohit Chopra, director of the Consumer Bureau, said in a statement. “The CFPB will put an end to these practices across the banking system.”
Regulators said Bank of America charged improper overdraft fees by charging customers double the fee for the same transaction. The first fee would be a $35 “insufficient funds” fine levied on a customer who attempted to pay for something with a check or automated transaction without having the funds to do so. The transaction will be declined, but if the merchant trying to collect the funds resubmits a request for payment, the funds will either be passed through and another $35 fee will hit the customer’s account, this time as an overdraft fee, or it will be rejected again, incurring a second “insufficient funds” fee. .
A Bank of America spokesperson said the bank “voluntarily” cut its overdraft fee from $35 to $10 in early 2022 and removed the $35 “insufficient funds” penalty. Since then, the spokesperson said, the company has seen a 90 percent drop in revenue from those fees.
In addition to the overdraft fee action taken jointly by the two regulators, the Consumer Bureau said it detected two other areas in which it said the bank was mistreating customers. For some customers tempted to open new credit card accounts, the bureau found that Bank of America did not deliver the sign-up bonuses it promised to customers who opened accounts on the phone or in person instead of online.
The bureau also said it had uncovered some cases in which Bank of America employees opened new cards in customers’ names without their knowledge or consent in order to achieve sales targets.
These fake accounts appear to make up only a “small percentage” of new Bank of America accounts, according to the Consumer Bureau. By comparison, these practices were widespread at Wells Fargo, leading to years of investigations by federal and state authorities that resulted in billions of dollars in penalties.
The regulators’ actions represent a significant move against one institution over “unwanted fees,” but not the largest. In December, the Consumer Bureau filed its largest action ever against a bank with a $3.7 billion lawsuit against Wells Fargo over those charges. In September, the bureau ordered Regions Bank, a medium-sized lender, to pay $50 million to a victim relief fund and refunded its clients $141 million in overdraft fees.
Recently, the banking industry has been trying to get ahead of regulatory action on customer fees. Several of the largest US banks announced changes to their overdraft policies in late 2021 and early 2022. Trade groups later argued that the changes made by the banks on their own 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 interference and collectively represent a transformative moment in time for the industry,” Lindsey Johnson, president of the Consumer Bankers Association, a lobbying group, said. books In an opinion article in Sept.