Bank of America has been hit with a hefty $60 million penalty by the Office of the Comptroller of the Currency (OCC) following violations related to its overdraft program. The OCC found that the bank charged customers excessive fees for resubmitted transactions, breaching Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices.
Customers of Bank of America were subjected to multiple overdraft and insufficient funds fees for a single transaction, resulting in the accumulation of tens of millions of dollars in charges. The bank's practices failed to disclose the possibility of incurring multiple fees from the same transaction, leaving customers unaware and unable to avoid these exorbitant charges. In response to regulatory concerns, Bank of America has agreed to refund tens of millions of dollars to affected customers.
Acting Comptroller of the Currency, Michael J. Hsu, emphasized the importance of protecting consumers and promoting fairness in the banking industry, stating, "Overdraft programs should help, not harm, consumers." The OCC's civil money penalty order aligns with the Consumer Financial Protection Bureau's (CFPB) consent order against Bank of America, which requires the bank to rectify the harm caused to customers.
Bank of America is facing more than just financial penalties. The CFPB has uncovered a series of wrongful practices by the bank, including systematic overcharging of customers, failure to honor promised bonuses, and opening unauthorized accounts. The company will pay over $250 million in refunds and fines as a consequence of these violations.
Federal regulators take action against Bank of America for deceptive practices and customer harm.
The CFPB discovered that Bank of America repeatedly charged customers $35 overdraft fees for the same transaction, generating substantial additional revenue for the bank over an extended period. Moreover, the bank failed to fulfill its commitment to provide cash and points rewards to credit card customers, selectively honoring them only for online applications. Starting in 2012, employees of Bank of America also enrolled customers in credit card accounts without their consent, potentially subjecting them to fees and compromising their personal information.
CFPB Director Rohit Chopra expressed his disapproval of these practices, stating, "These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system." Bank of America will allocate more than $100 million in restitution to affected customers, pay a $90 million fine to the CFPB, and face an additional $60 million fine from the OCC.
Bank of America has taken steps to address its misconduct. The company has reduced its revenue from overdraft and insufficient fund fees by over 90% since mid-2022. The OCC's findings indicate that the bank accumulated "tens of millions of dollars" in fees from customers between March 2020 and November 2021. These charges were levied when a customer lacked funds to cover a transaction, and if the merchant resubmitted the transaction, another $35 penalty was imposed. The OCC noted that a reasonable customer would not have anticipated multiple fees in such circumstances.
The banking industry has faced significant scrutiny in recent years due to similar fraudulent practices. Wells Fargo reached a $3.7 billion settlement in December for opening millions of fake accounts, and U.S. Bank received a $37.5 million fine last summer for its own sham accounts scandal.
Bank of America's track record with federal regulators is far from spotless. In 2014, the CFPB ordered the company to pay $727 million for illicit credit card practices. Additionally, the bank paid $225 million in fines last year for mishandling state unemployment benefits during the pandemic and faced a separate $10 million civil penalty for unlawful garnishments.
Senate Banking Committee Chairman Sherrod Brown expressed his dissatisfaction with Bank of America's actions, stating, "This is just the latest in a long line of illustrations of why we can't trust Wall Street to do the right thing."
Bank of America has neither admitted nor denied the allegations, as stipulated in its settlement agreements with both the CFPB and the OCC.
