Bank Agrees to Pay More Than $3 Billion to Settle Consumer Protection Violations

A bank settled CFPB charges of violating the unfair acts and practices provisions of the Consumer Financial Protection Act. The bank agreed to pay more than $2 billion in redress to consumers and a $1.7 billion civil monetary penalty to settle multiple violations pertaining to (i) the servicing of automobile loans, (ii) mortgage loan modifications, (iii) surprise overdraft fees and (iv) improper account freezes.

According to the Consent Order, in violation of Section 1031(c)(1) ("Prohibiting unfair, deceptive, or abusive acts or practices") and Section 1036(a)(1)(B) ("Prohibited acts") and of the Consumer Financial Protection Act, the CFPB found that the bank:

• incorrectly applied borrowers' payments to auto loans, resulting in erroneous fees and interest, and in some cases, wrongful repossession;

• did not issue refunds for certain fees and add-on products when a loan ended early;

• failed to address the denial of loan modifications to certain customers, which in some cases resulted in wrongful foreclosures, despite being aware of the issue;

• charged overdraft fees on debit card transactions and ATM withdrawals to customers that had enough money in their accounts to cover the transactions at the time they were authorized; and

• froze consumer accounts and denied those consumers access to funds for nearly two weeks after the bank's automated filters incorrectly flagged deposits as potentially fraudulent.

In addition to the monetary penalties, the bank agreed to (i) stop charging overdraft fees when the consumer has sufficient funds at the time of transaction but has a negative balance once the transaction settles and (ii) take steps to ensure that auto loan borrowers receive refunds for fees and add-ons paid if the loan ends early.