National Bank to Pay Over $120 Million for Illegal Overdraft Practices

The CFPB recently entered into a $122 million consent order with a national bank for its failure to obtain affirmative consent from consumers prior to enrolling them into an overdraft program.  The CFPB also found deficiencies with the bank’s furnishing practices to nationwide specialty consumer reporting agencies (NSCRAs).  

The bank failed to provide written disclosures about its overdraft program to consumers opening checking accounts at stores or during offsite enrollment events.  In both instances, bank employees obtained consumers’ verbal authorization to enroll in the overdraft program.  However, those consumers were only provided with written disclosures about the program at the end of the enrollment process when they signed pre-filled forms required for opening checking accounts.  By law, the bank was required to provide written disclosures of the program before it could obtain consumers’ affirmative consent.  The CFPB found that the bank did not receive affirmative consent when consumers signed those forms because written disclosures were provided after the verbal authorizations. 

For certain offsite enrollments, the CFPB found that bank employees had been instructed to fill out the forms and pre-select the enrollment option, and the CFPB found that the bank did not obtain affirmative consent from those consumers who signed those forms. In other instances, bank employees failed to bring the forms, but enrolled consumers in the overdraft program anyway.

The CFPB found the marketing and sales practices of the overdraft program to be abusive and deceptive acts or practices.  The program was advertised as a free service or benefit and a feature for all new accounts, when, in fact, consumers were charged $35 for each overdraft and the program was optional.  The CFPB found that those misrepresentations, combined with the pre-filled forms, amounted to abusive and deceptive acts or practices.

The bank was also found to have misrepresented the overdraft program to existing customers during phone conversations and through mailers.  The bank misrepresented the types of transactions covered under the overdraft program, the effective date of the program following enrollment, and the daily ATM withdrawal limit for those enrolled in the program.

The CFPB found that the bank had deficiencies with its furnishing practices to the NSCRAs. The bank did not have policies concerning the accuracy and integrity of consumer information furnished to the NSCRAs, or the handling of disputes in connection with the information furnished.

As part of the consent order, the bank will pay $97 million in consumer restitution and $25 million in penalties. It is also required to submit a comprehensive compliance plan that addresses the issues identified in its enrollment practices into the overdraft program and its furnishing practices to the NSCRAs.