CFPB Issues Guidance Targeting Banks’ ‘Phantom Opt-In Agreements’

The Consumer Financial Protection Bureau (CFPB) aims to stop banks from charging overdraft fees based on what it calls “phantom opt-in agreements” — cases in which banks claim to have customer consent to charge overdraft fees but can provide no proof.

The agency published a guidance to help federal and state consumer protection enforcers stop banks from charging overdraft fees in these cases, the CFPB said in a Tuesday (Sept. 17) press release.

“Consumer protection law enforcers should assume consumers have not opted into overdraft unless the banks can prove otherwise,” the CFPB said in the release.

CFPB Director Rohit Chopra said in the release: “The CFPB has found instances where banks have no evidence that they obtained consent for overdraft. No Americans should be hit with bank account fees that they never agreed to.”

The guidance published Tuesday is the latest in a series of actions the CFPB has taken to make sure financial institutions’ overdraft services follow the law and to prevent them from charging junk or unlawful fees, according to the release.

For example, in December 2023, the CFPB ordered Atlantic Union Bank to pay $6.2 million, saying the bank misled customers and improperly enrolled them into paying overdraft fees.

The CFPB found that Atlantic Union Bank violated federal law when enrolling thousands of customers in checking account overdraft programs by phone. Specifically, it said the bank charged fees without proper consent and misled customers about the terms and costs of overdraft protection.

Commenting on the settlement at the time in a press release, Atlantic Union Bank said that it did not admit to any wrongdoing under the settlement.

In September 2022, the CFPB said surprise overdraft fees would cost Regions Bank a total of $191 million in customer redress plus a civil monetary penalty.

The agency said the bank charged customers surprise overdraft fees on certain ATM withdrawals and debit card purchases despite telling customers they had sufficient funds. It added that the bank’s leadership knew about the illegal practice and opted to keep it in place until it had secured another fee-based revenue stream.

Regions Bank said at the time in a press release that it “disagrees with the CFPB’s characterizations” but was moving forward with new customer enhancement.