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Last Updated: July 11, 2023 at 9:30 p.m. ET First Published: July 11, 2023 at 4:24 p.m. ET
The $250 million sum includes $100 million in redress to affected customers, regulators said
Bank of America will pay customers $100 million for ‘double-dipping’ on fees and opening fake accounts. Will you be one of them?
mark ralston/Agence France-Presse/Getty Images
[]Federal regulators have ordered Bank of America to pay $100 million to customers for allegedly mistreating them with unfair fees, withholding credit-card rewards, and opening fake accounts.
[]The good news: Customers tangled up in the scandal do not have to do anything except wait to get paid by the bank if they have not been paid already, the Consumer Financial Protection Bureau said Tuesday.
[]“Depending on the circumstances of the consumer, Bank of America will deposit funds into the consumer’s deposit account or will send the consumer a check,” a CFPB spokesperson told MarketWatch.
[]The $100 million in redress to customers is one part of Bank of America’s $250 million tab on the now-halted practices.
[]Bank of America also has to pay $90 million in penalties to the CFPB and $60 million to the Office of the Comptroller of the Currency.
[]The two agencies alleged that Bank of America had a $35 non-sufficient funds fee it applied — and then reapplied the same fee for the same transaction. The bank stopped assessing the fee in February 2022. But between September 2018 and early 2022, the bank drummed up “hundreds of millions” from those repeat fees, the CFPB said.
[] “‘Depending on the circumstances of the consumer, Bank of America will deposit funds into the consumer’s deposit account or will send the consumer a check.’”
— CFPB spokesperson []The bank also dangled credit-card sign-up bonuses, but did not follow through on those rewards, the regulators said. To meet now-ceased sales goals, bank workers signed up certain consumers for credit cards without their knowledge, the CFPB also alleged.
[]“Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent,” CFPB Director Rohit Chopra said in a statement.
[]“These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system,” Chopra added.
[]“We voluntarily reduced overdraft fees and eliminated all non-sufficient fund fees in the first half of 2022. As a result of these industry-leading changes, revenue from these fees has dropped more than 90%,” a bank spokesperson said.
[]The bank did not admit wrongdoing in the matter, CFPB documents show.
[]A fee for insufficient funds is tied to a bounced payment. Overdraft fees can kick in when banks cover transactions even though there’s not enough money to cover it. Bank of America reduced its overdraft fee to $10 from $35 last May.
[]The fine for Bank of America comes at a time when the Biden administration is targeting the array of junk fees imposed on consumers.
[]Banks and credit unions last year raked an estimated $9.9 billion in overdraft and non-sufficient funds fees, down from $10.6 billion a year earlier, and well below the $15.5 billion in 2019, according to the nonprofit Financial Health Network.
[] “Banks and credit unions raked an estimated $9.9 billion in overdraft and non-sufficient funds fees in 2022, down from $10.6 billion a year earlier, and well below the $15.5 billion in 2019.”
[]Bank of America said it’s turned the page, but the story is not over yet.
[]There’s still approximately $80 million in repeat non-sufficient funds fees that still have to be refunded, the CFPB spokesperson said.
[]The bank has already paid approximately $23 million to the customers who were hoping for credit-card sign-up bonuses, the CFPB added.
[]The CFPB alleged people with accounts unknowingly opened in their name wound up getting charged for fees. The unauthorized card openings harmed the credit profiles of these customers because, on paper, they were setting up new credit lines.
[]It’s Bank of America’s job to find these customers and fix the fallout, the CFPB spokesperson said. “Consumers who are eligible for redress do not have to do anything. Bank of America will be sending redress to affected consumers.”
[]Bank of America’s fines were small compared to the $3.7 billion fine that the CFPB ordered last year against Wells Fargo & Co WFC, +0.99%. In wide-ranging allegations, the CFPB said that bank wrongfully repossessed cars, foreclosed homes and hit deposit accounts with surprise fees. Wells Fargo did not admit wrongdoing in the settlement.
[]The latest action comes as a question mark hangs over the future of the federal agency. The Supreme Court is poised to hear a case challenging the ways the CFPB gets its funding. The case is an “existential” issue for the agency, one CFPB official has said.
[]However, the actions taken against Bank of America are a timely reminder of the agency’s importance, another watchdog said Tuesday.
[]“The Consumer Financial Protection Bureau’s strong enforcement action shows why it makes a difference to have a federal agency monitoring the financial marketplace day in and day out,” said Mike Litt, consumer campaign director at U.S. PIRG. “We need the government to ensure that the CFPB continues to get reliably funded to do its one job: protecting consumers.”
[]Bank of America BAC, +1.26% shares are up 1.4% on Tuesday but down approximately 12% year to date. The Dow Jones Industrial Average DJIA, +0.93% is up 3% year to date while the the S&P 500 SPX, +0.67% is up 15% since the start of the year.
‘There’s nothing in the data that shows prices crash’: U.S. housing market is showing remarkable resilience.
[]The average home buyer may be frustrated by high home prices. But like it or not, the housing market is on the up.
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