Bank of America has withheld promised perks from some of its credit card customers, double-charged overdraft fees and covertly opened card accounts in customers’ names without their knowledge or consent, federal regulators said Tuesday.
The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, which oversee the banking sector, have fined the country’s second-largest bank $150 million over so-called “junk fees” it charges its customers noted the abuse of customer accounts. Some customers have repeatedly paid overdraft fees of $35 for a single transaction requested from an account with insufficient funds.
As part of the Consumer Protection Agency’s actions, the bank will repay more than $80 million to customers who were wrongly charged or denied sign-up bonuses, and will compensate customers whose cards were opened without their knowledge in their name.
The practices came to light amid a 2022 industry-wide probe into the fees companies were charging their customers, ordered by President Biden. According to regulators, Bank of America ended the practices described in Tuesday’s actions in 2021 and 2022.
“These practices are illegal and erode customer confidence,” Rohit Chopra, the director of the Consumer Protection Agency, said in a statement. “The CFPB will put an end to these practices throughout the banking system.”
Regulators said Bank of America levied unreasonable overdraft fees by charging its customers twice for the same transaction. The first charge would be a $35 “insufficient funds” penalty levied against a customer who attempted to pay for something by check or automated transaction without having the funds required to do so. The transaction would be declined, but if the merchant trying to collect the money submitted another request for payment, the money would go through and another $35 fee would be charged to the customer’s account, this time as an overdraft fee, or she would be rejected again. A second “insufficient funds” fee will apply.
A spokesman for Bank of America said the bank “voluntarily” lowered overdraft fees from $35 to $10 in early 2022 and eliminated its $35 “insufficient funds” penalty. Since then, revenue from such fees has fallen by 90 percent, the spokesman said.
In addition to the joint action taken by the two regulators on overdraft fees, the Consumer Agency said it had uncovered two other areas where the bank was mistreating customers. For some customers who were tricked into opening new credit card accounts, the bureau found that Bank of America had not given the sign-up bonuses it had promised to customers who opened accounts over the phone or in person rather than online.
The bureau also said it has uncovered some instances where Bank of America employees have opened new cards on behalf of customers without their knowledge or consent in order to meet sales goals.
According to the Consumer Agency, these fake accounts appeared to make up “a small percentage” of Bank of America’s new accounts. By comparison, such practices were rampant in Wells Fargo, prompting years of investigation by federal and state agencies that resulted in billions of dollars in penalties.
Regulators’ actions represent a significant move against a single institution over “junk fees,” but not the largest. In December, the Consumer Protection Agency filed a $3.7 billion lawsuit against Wells Fargo over such charges, its largest ever against a bank. In September, the bureau ordered Regions Bank, a mid-tier lender, to contribute $50 million to a victim relief fund and refund its customers $141 million in overdraft fees.
The banking industry has recently tried to forestall regulatory intervention in relation to customer fees. Several of the largest US banks announced changes to their overdraft policies in late 2021 and early 2022. Trade groups later argued that the changes made by the banks themselves meant that no new laws or regulations were needed to regulate overdraft fees.
“These reforms of the country’s largest banks came without regulatory or legislative interference and represent a turning point for the industry overall,” wrote Lindsey Johnson, president of the Consumer Bankers Association, a lobby group, in an opinion piece in September.