Bank of America is accused of establishing fraudulent accounts and illegally charging junk fees. Federal regulators announced on Tuesday that they have determined that Bank of America harmed its customers by double-dipping on fees, withholding credit card rewards, and opening phony accounts, all of which violate various consumer financial protection laws.
The Consumer Financial Protection Bureau consequently ordered Bank of America (BAC) to pay more than $100 million to consumers and $90 million in penalties. In addition, the Office of the Comptroller of the Currency fined Bank of America (BAC) $60 million.
Serving 68 million individuals and small enterprises, this bank is the second-largest in the United States. Some of the charges resemble the Wells Fargo scandal of the previous decade, in which millions of bank accounts were opened without consumer permission.
CFPB Director Rohit Chopra said in a statement that Bank of America improperly withheld credit card rewards, double-charged fees, and opened accounts without consent. “These practices are unlawful and erode customer confidence. The CFPB will halt these practices across the entire banking system.”
The specified infractions
Bank of America, according to the CFPB, “harmed hundreds of thousands of consumers over a period of several years and across multiple product lines and services.”
The CFPB and OCC discovered, among other things, that the bank, which normally charges customers $35 if their transaction is declined due to insufficient funds, allowed those fees to be “repeatedly charged” for the same transaction, resulting in “tens of millions of dollars in fees on resubmitted transactions,” according to the OCC.
This would occur if a third-party merchant resubmitted the charge to the customer’s account, which may still have had insufficient funds to cover the expense after the initial transaction was declined. The consumer would then be charged either a $35 insufficient funds fee or a $35 overdraft fee.
“The bank’s disclosures did not make it obvious that multiple fees may result from a single transaction. In addition, customers had no way of knowing when or if a merchant would resubmit a transaction to the bank for payment, making it impossible for them to avoid being charged multiple times for the same transaction, according to the OCC’s statement.
Last year, Bank of America informed CNN via email that these fees had been eliminated. “During the first half of 2022, we voluntarily reduced overdraft fees and eliminated all fees for insufficient funds. Because of these industry-leading adjustments, revenue from these fees has decreased by more than 90 percent, according to a spokesperson.
The CFPB also alleged that the bank made special offers of cash and points when signing up new credit card customers but unlawfully withheld these bonuses from tens of thousands of cardholders.
In order to meet now-defunct sales-based incentive objectives and improve their evaluations, bank employees “illegally applied for and enrolled consumers in credit card accounts without consumers’ knowledge or consent” beginning at least in 2012, according to the agency. This entailed using or obtaining consumers’ credit reports without their consent, which resulted in customers being charged unjustified fees, receiving negative marks on their credit reports, and having to make efforts to correct the bank’s errors.
The penalties Bank of America is obligated to pay
As a consequence of the violations announced by regulators on Tuesday, Bank of America will be required to pay over $250 million to the affected agencies and customers.
However, this is not the first time the bank has been penalized by regulators. And those reported on Tuesday are less than those reported previously. In 2014, the CFPB ordered it to pay consumers $727 million in restitution for unlawful credit card practices. Last year, it was ordered to pay a $10 million civil penalty for unlawful garnishments and $225 million to consumers for “botched disbursement of state unemployment benefits during the height of the COVID-19 pandemic.”