TD Bank has agreed to pay some $122 million to settle a case with the Consumer Finance Protection Bureau involving allegedly illegal overdraft practices, according to a administrative filing. The bank agreed to pay approximately $97 million to affected and a $25 million civil penalty.
The CFPB alleged that TD Bank misled customers signing up for the Debit Card Advance (DCA) program for overdraft protection by failing to fully obtain their consent to do so and then charging them fees anyway. This went on between 2014 and 2018, the filing stated.
The DCA charges $35 for the bank to offset each covered transaction that exceeds a customer's balance by more than $5. That's in addition to standard overdraft service for normal transactions.
According to the CFPB filing, TD Bank employees would only inform new customers of the DCA policy verbally, asking the customer to confirm orally if they wished to participate. The company wouldn't print and present the customer with a paper notice until the end of the account opening process.
The CFPB said that when the form came, it would have a pre-checked box indicating what the customer decided about DCA. The process to disengage from the program if people changed their minds involved the customer actively seeking out another form to do so.
Through December 2018, TD Bank's policy of asking customers to verbally state whether they wanted to enroll in DCA violated the law, the CFPB found. The bank charged around 1.42 million affected consumers covered overdraft fees through that time.
In addition, the CFPB found that TD Bank would for years instruct employees to do the same thing with DCA at events not held at a bank location, asking customers to verbally consent to DCA without providing them a form initially, the agency concluded.
In some instances, bank employees would ask customers to sign forms with the DCA option pre-checked, without explaining the program, the CFPB found. TD Bank also misrepresented the terms of DCA when customers enrolled via phone and when the bank sent out mail to customers who had initially rejected the program, the administrative filing stated.
All told, the agency ruled that TD Bank engaged in "misleading or incomplete oral presentation of the DCA service for the purpose of eliciting an oral-enrollment decision," and when it did not give the proper documents, the bank "materially interfered with consumers’ ability to understand the terms and conditions of DCA.
However, TD Bank neither admitted nor denied wrongdoing in connection with the settlement, although it agreed to issue clear notices going forward to all customers telling them exactly what they're agreeing to with DCA.
TD Bank President and CEO Greg Braca said in a statement that "throughout the period in question, TD had a clear process to secure formal consent before providing this service to customers, enabling them to make an informed and conscious choice. Prior to this settlement, TD had already voluntarily and proactively implemented enhancements to our Debit Card Advance disclosure and enrollment processes beginning in 2014. Although we disagree with the CFPB's conclusions, we have cooperated fully to resolve this matter and are moving forward with a continued focus on meeting the needs of our customers."
The bank added that it's continuing to offer the DCA program, "which is valued by customers and helps them avoid declined transactions due to insufficient funds."
(This article has been updated with TD Bank's statement and additional details.)