Federal regulators have ordered Bank of America to pay $100 million to customers for allegedly mistreating them with unfair fees, withholding credit-card rewards, and opening fake accounts. Customers tangled up in the scandal do not have to do anything except wait to get paid by the bank if they have not been paid already, the Consumer Financial Protection Bureau said. “Depending on the circumstances of the consumer, Bank of America will deposit funds into the consumer’s deposit account or will send the consumer a check,” a CFPB spokesperson told MarketWatch. There’s no question that we needed to obtain substantial redress for the victims that Bank of America affected. Those consumers will not have to lift a finger in order to get those refunds,” CFPB Director Rohit Chopra said in an NPR interview.
The $100 million in redress to customers is one part of Bank of America’s $250 million tab on the now-halted practices. Bank of America also has to pay $90 million in penalties to the CFPB and $60 million to the Office of the Comptroller of the Currency. The two agencies alleged that Bank of America had a $35 non-sufficient funds fee it applied — and then reapplied the same fee for the same transaction. The bank stopped assessing the fee in February 2022. But between September 2018 and early 2022, the bank drummed up “hundreds of millions from those repeat fees, the CFPB said. The bank also dangled credit-card sign-up bonuses, but did not follow through on those rewards, the regulators said. To meet now-ceased sales goals, bank workers signed up certain consumers for credit cards without their knowledge, the CFPB also alleged.
“Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent,” Chopra said in a statement. These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system,” Chopra added. We voluntarily reduced overdraft fees and eliminated all non-sufficient fund fees in the first half of 2022. As a result of these industry-leading changes, revenue from these fees has dropped more than 90%,” a bank spokesperson said. The bank did not admit wrongdoing in the matter, CFPB documents show. A fee for insufficient funds is tied to a bounced payment. Overdraft fees can kick in when banks cover transactions even though there’s not enough money to cover it. Bank of America reduced its overdraft fee to $10 from $35 last May. The fine for Bank of America comes at a time when the Biden administration is targeting the array of junk fees imposed on consumers.
Banks and credit unions last year raked an estimated $9.9 billion in overdraft and non-sufficient funds fees, down from $10.6 billion a year earlier, and well below the $15.5 billion in 2019, according to the nonprofit Financial Health Network. Bank of America said it’s turned the page, but the story is not over yet. There’s still approximately $80 million in repeat non-sufficient funds fees that still have to be refunded, the CFPB spokesperson said. The bank has already paid approximately $23 million to the customers who were hoping for credit-card sign-up bonuses, the CFPB added. These customers were “deprived of hundreds of dollars each,” Chopra noted in the NPR interview. The CFPB alleged people with accounts unknowingly opened in their name wound up getting charged for fees. The unauthorised card openings harmed the credit profiles of these customers because, on paper, they were setting up new credit lines. It’s Bank of America’s job to find these customers and fix the fallout, the CFPB spokesperson said. “Consumers who are eligible for redress do not have to do anything. Bank of America will be sending redress to affected consumers.”
Bank of America’s fines were small compared to the $3.7 billion fine that the CFPB ordered last year against Wells Fargo & Co. In wide-ranging allegations, the CFPB said that bank wrongfully repossessed cars, foreclosed homes and hit deposit accounts with surprise fees. Wells Fargo did not admit wrongdoing in the settlement. “As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted,” Wells Fargo CEO Charlie Scharf said in a December statement. “This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us.” The latest action comes as a question mark hangs over the future of the federal agency. The Supreme Court is poised to hear a case challenging the ways the CFPB gets its funding. The case is an “existential” issue for the agency, one CFPB official has said. However, the actions taken against Bank of America are a timely reminder of the agency’s importance, another watchdog said Tuesday. “The Consumer Financial Protection Bureau’s strong enforcement action shows why it makes a difference to have a federal agency monitoring the financial marketplace day in and day out,” said Mike Litt, consumer campaign director at U.S. PIRG. “We need the government to ensure that the CFPB continues to get reliably funded to do its one job: protecting consumers.” Bank of America shares are up 1.4% on Tuesday but down approximately 12% year to date. The Dow Jones Industrial Average is up 3% year to date while the the S&P 500 is up 15% since the start of the year.
