The Consumer Financial Protection Bureau (CFPB) has ordered Bank of America (BoA) to pay over $100 million to the individuals they have harmed over unlawful practices. Additionally, BoA must pay $150 million in penalties to the CFPB. Here’s what you need to know.
Bank of America To Pay Over $100M for Unlawful Practices
Bank of America is a global bank serving 68 million people and small business clients. It stands as one of the largest consumer financial services in the U.S. and, as of March 31, 2023, has over $2.4 trillion in consolidated assets and $1.9 trillion in domestic deposits, making it the second-largest bank in the country.
Yet, according to recent findings published by the CFPB, over several years and across multiple product lines and services, Bank of America took advantage of its customers’ trust. In the process, BoA caused harm to thousands of consumers and had been systematically double-dipping on fees imposed on customers with insufficient funds in their accounts – a practice found to be illegal by the Office of the Comptroller of the Currency (OCC). The bank had also withheld reward bonuses explicitly promised to credit card customers.
Additionally, BoA used sensitive personal information to open accounts without customer knowledge or authorization. For these reasons, Bank of America is set to pay $90 million in penalties to the CFPB and $60 million to the OCC, plus the $100 million to the consumers they affected.
“These Practices are Illegal and Undermine Customer Trust”
“Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent,” said CFPB Director Rohit Chopra. “These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system.”
The Specifics of the Claims
The double-dipping scheme regards BoA’s $35 overdraft fee policy. BoA would charge customers a $35 fee after a declined transaction due to insufficient funds. However, the CFPB’s investigation found that Bank of America repeatedly charged the $35 fee for the same transactions. In other words, multiple $35 fees for one individual overdrafted purchase. It happened over multiple years and generated substantial additional revenue, albeit illegally.
The investigation also found that rewards had been illegally withheld from credit cardholders. To compete with other card issuers, Bank of America offered potential customers sign-up bonuses for cash or points. The sign-up offers were never honored for both over-the-phone applicants and in-branch.
The last finding shows Bank of America illegally used customers’ personal information to open accounts without their knowledge. From at least 2012, Bank of America employees illegally applied for and enrolled consumers in credit card accounts without consumers’ knowledge or authorization. The bank also illegally used or obtained consumers’ credit reports without their permission to complete applications. BoA’s actions caused individuals to get hit with unjustified fees, negative hits on their credit reports, and unforeseen time spent trying to correct the issues.
Bank of America’s Negative Track Record
This is not the first time Bank of America has been in hot water for illegal activities. In 2014, the CFPB ordered Bank of America to pay $727 million to consumers for unlawful credit card practices. In May 2022, CFPB also ordered the company to pay a $10 million civil penalty for illicit garnishments. Later in 2022, the CFPB and OCC fined the bank $225 million and required it to pay hundreds of millions of dollars in redress to consumers for the mismanaged disbursement of state unemployment benefits at the height of the COVID-19 pandemic.
Implementing Lawful Action
The CFBP has taken legal action, against Bank of America, following protection laws under the Consumer Financial Protection Act. Bank of America has been ordered to do the following:
Immediate action to stop its repeat offenses:
Under the terms of the order, Bank of America is to discontinue opening unauthorized accounts. The company has also been ordered to provide card rewards and bonuses as advertised. Otherwise, the bank must disclose any exceptions or limitations. Additionally, Bank of America is prohibited from any future repeat charge of overdraft fees.
Compensate affected consumers:
Bank of America has also been ordered to compensate affected consumers for the illegally charged fees – approximately $80.4 million in consumer reparations. Other consumers to be compensated include those who were directly affected by costs relating to the unauthorized opening of new credit card accounts and those who were denied promised credit card reward bonuses.
Pay $90 million in penalties:
In addition to compensating the individuals affected by Bank of America’s illegal practices, the bank has been ordered to pay a total of $90 million in penalties to CFPB – $60 million for the repeated overdraft fees charged and $30 million for its credit card rewards practices and the unauthorized account opening scheme. Lastly, BoA will also pay a $60 million penalty to the OCC, for repeated overdraft fees charged.
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