The Consumer Financial Protection Bureau announced yesterday (April 28) that it has made its first enforcement ruling against a bank that was accused of issuing illegal overdraft fees from its customers.
The bank the CFPB ruled against is Alabama-based Regions Bank, which the agency said failed to take the proper steps to ask its customers if they’d like to enroll in overdraft services before the bank charged them for fees for the service. The bank allowed this practice to continue for nearly a year, the CFPB said, which “amplified the harm.” The bank also charged overdraft and non-sufficient funds fees of deposit advances, even though the bank said it wouldn’t conduct this practice. The bank’s failure to comply with regulations resulted in hundreds of thousands of consumers being impacted — and to an amount of $49 million in illegal charges.
“The 2010 Federal Reserve overdraft ‘opt-in’ rule is critically important. It prohibits depository institutions from charging an overdraft fee for ATM withdrawals and one-time debit card transactions unless the consumer has affirmatively ‘opted in,'” wrote Cara Petersen, Deputy Enforcement Director of the CFPB, in a prepared statement. “The opt-in permission means that if consumers overspend their balance while using their debit card to make a purchase or withdraw cash from an ATM, the bank will cover the shortage with a temporary advance, in exchange for a fee. If consumers do not opt in, transactions are generally declined, with no fee.”
In light of the ruling, Regions Bank said it has refunded that $49 million to its consumers, but the order from the CFPB requires that the bank check to ensure its customers receive money for the wrongfully charged fees. The bank is also required to pay a $7.5 million fee for the regulation violations.
According to the CFPB, Regions Bank operates approximately 1,700 retail branches and 2,000 ATMs across 16 states, and is one of the country’s biggest banks with more than $119 billion in assets.
The CFPB also said that Regions’ deposit advance product, called Regions Ready Advance, contributed to another violation by the bank. CFPB’s ruling said that Regions Bank, between November 2011 and August 2013, charged non-sufficient funds fees and overdraft charges of nearly $2 to tens of thousands of its deposit customers.
“It is worth noting, Regions’ conduct would have warranted an even stiffer penalty if it had not voluntarily refunded consumers and promptly self-reported this problem to the Bureau once it was brought to the attention of senior management,” Petersen wrote. “Any consumers who had their credit harmed as a result of the violations will also get their credit records straightened out.”