The Consumer Financial Protection Bureau (CFPB) took action against Bank of America for violating a number of laws dating back to 2012. America’s second largest bank, which has around 68 million individual and small business clients, will have to pay $250 million in fines and compensation to settle claims. The CFPB and the Comptroller of the Currency (OCC) said that the bank harvested junk fees, withheld credit card rewards and that employees opened unauthorized customer accounts.
Bank of America has agreed to pay affected customers $100 million in restitution. In a statement the CFPB Director Rohit Chopra said that the financial institution “wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent. 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 employees secretly made clients credit cards: how do I know If I have one?
The exact manner in which customers will be made aware of whether they were affected by the practices that Bank of America settled to make amends for, if not already, has not been stated. However, regulators say that the number of clients enrolled in credit card accounts without their knowledge represented a “small percentage” of new accounts at the bank.
Bank of America employees illegally applied for and enrolled consumers without their consent or knowledge in credit card accounts dating back at least to 2012. The unauthorized accounts were opened by the bank’s staff to “meet sales-based incentive goals and evaluation criteria,” a program that has now been disbanded according to regulators.
Consumers’ credit reports were illegally obtained or used without client’s permission resulting in unjustified fees and harm to their credit profiles as well as a loss of time correcting the errors.
“Double-dipping scheme to harvest junk fees”
Bank of America will also have to reimburse customers who were harmed by a policy which charged a $35 fee multiple times for the same transaction when they didn’t have adequate funds in their account. The “double-dipping scheme to harvest junk fees” generated hundreds of millions of dollars in additional revenue for the bank between February 2018 until February 2022.
“Building a business model by double dipping on fees is simply not legal,” said Chopra speaking to NPR Business Correspondent David Gura. “That’s why we’ve sanctioned Bank of America and ordered them to pay back the customers they cheated.”
The bank has since voluntarily reduced overdraft fees in addition to eliminating all fees for non-sufficient funds in the first half of last year according to Naomi Patton, Bank of America Senior Vice President of Media Relations. She told NPR that it has resulted in a more than 90 percent reduction in revenue from those fees. Furthermore, Bank of America cut its overdraft fee from $35 to $10 in May 2022.
Bank of America must keep it promise on credit card rewards program
The CFPB also found that ten of thousands of customers were denied promised cash and points as part of special offers when signing up for a credit card. Bank of America has been ordered to follow through on those promises according to regulators.
