Bank Settles CFPB Charges for Abusive Overdraft Fees

A bank settled CFPB charges for unfair and abusive practices by charging overdraft fees on transactions when customers had sufficient funds in their accounts when the transactions were made.

According to the Order, the bank charged consumers overdraft fees for debit card purchases and ATM withdrawals in circumstances where consumers had sufficient funds in their accounts when such purchases and/or withdrawals were made "but then later settled with an insufficient balance (i.e., 'Authorized-Positive Overdraft Fees')." The CFPB stated that while the bank was "aware that government agencies previously had found that one or more financial institutions violated the law when they charged these Authorized-Positive Overdraft Fees," the bank continued to charge the fees while it determined alternative methods of generating fee revenue "that would fully offset [the bank's] expected revenue loss from eventually eliminating the Authorized-Positive Overdraft Fees."

As a result, the CFPB found that the bank violated Sections 1031 ("Prohibiting unfair, deceptive, or abusive acts or practices") and 1036 ("Prohibited acts") of the Consumer Financial Protection Act.

To settle the findings, the bank agreed, among other things, to (i) refund at least $141 million in Authorized-Positive Overdraft Fees, (ii) pay a fine of $50 million to the CFPB which will be deposited into the CFPB's victim's relief fund and (iii) stop charging Authorized-Positive Overdraft Fees.