On July 11, regulatory agencies disclosed that Bank of America — one of the country’s leading financial institutions — was found to have violated various consumer protection laws. These breaches included the imposing of duplicate fees, withholding promised credit card rewards, and the illicit opening of unauthorized accounts.
As a result, the Consumer Financial Protection Bureau (CFPB) ordered the bank to reimburse customers with a sum exceeding $100 million, along with $90 million in penalties. Furthermore, an additional $60 million fine was mandated by the Office of the Comptroller of the Currency (OCC).
With a client base of 68 million individuals and small businesses, Bank of America stands as the second largest bank in the United States. The charges against it resonate strongly with the Wells Fargo scandal that took place in 2016, which involved the unauthorized opening of millions of bank accounts, and resulted in the termination of more than 5,300 employees.
“Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent,” said CFPB Director Rohit Chopra in a statement. “These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system.”
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The alleged infractions were further detailed by the CFPB. The violations spanned several years and negatively affected hundreds of thousands of consumers across multiple product lines and services, it said.
The CFPB and OCC found one such practice in which Bank of America had been imposing a $35 fee on customers with insufficient funds. The fee was repeatedly levied for the same transaction — amassing tens of millions of dollars in recharged fees on resubmitted transactions, according to the OCC. The repeated charges occurred when a third-party merchant resubmitted a previously declined transaction due to insufficient funds, causing the customer to incur another $35 fee.
OCC stated, “The bank’s disclosures did not clearly explain that multiple fees could result from the same transaction. Additionally, customers had no ability to know when or if a merchant would resubmit a transaction to the bank for payment and therefore could not reasonably avoid the assessment of multiple fees for the same transaction.”
Despite Bank of America announcing “sweeping changes” to its overdraft services last year, the company continued to engage in deceptive practices, and illegally withheld promised perks and rewards from thousands of consumers, the CFPB said.
Following these revelations, Bank of America is obliged to pay out over $250 million in total to both the agencies and the affected customers. However, this is not the bank’s first encounter with such penalties.
Past incidents include a $727 million restitution for illicit credit card practices in 2014, a $10 million penalty last year for illegal garnishments, and a $225 million consumer relief penalty for “mishandled state unemployment benefits” that were disbursed during the COVID-19 pandemic.
For those affected by these violations, the CFPB assures that no action is required to claim payment. Bank of America is responsible for making payments either through direct deposit into the customer’s account or by issuing a check. For those who had promised credit card rewards withheld, the bank has reportedly already issued the due payments.
In response, Bank of America told CNN in a statement that such fees had indeed “been abolished” last year. “We voluntarily reduced overdraft fees and eliminated all non-sufficient fund fees in the first half of 2022. As a result of these industry-leading changes, revenue from these fees has dropped more than 90 percent,” a spokesperson said.
Other violations the bank is accused of included making special offers to new credit card customers then unlawfully withholding the promised bonuses, as well as the illicit opening of credit card accounts without consumers’ knowledge or consent — culminating in customers incurring unjustified fees that in some cases resulted in their credit scores being impacted.
In the coming weeks, the CFPB plans to post a point of contact at Bank of America on its website for further consumer inquiries, as well as updates pertaining to this case.
This is a developing story. More information will be added as it becomes available.