Bank of America, the second-largest bank in the United States, has been ordered to pay more than $100 million to customers and an additional $150 million in penalties for engaging in illegal practices.
The Consumer Financial Protection Bureau (CFPB) conducted an investigation and found that the bank had harmed hundreds of thousands of customers over several years through actions such as double charging insufficient fund fees, withholding reward bonuses, and opening unauthorized accounts.
The CFPB determined that Bank of America had implemented a “double-dipping scheme,” charging customers $35 multiple times for insufficient funds transactions, resulting in significant additional revenue for the bank. The Office of the Comptroller of the Currency (OCC) also discovered that the bank violated laws related to overdraft fees, charging customers millions of dollars in fees for resubmitted transactions.
“Overdraft programs should help, not harm, consumers,” Acting Comptroller of the Currency Michael J. Hsu said in a news release. “Today’s action demonstrates the OCC’s commitment to protecting consumers and promoting fairness and trust in banking. We expect banks to conduct their activities in compliance with all applicable laws and standards, and when they don’t, we will act accordingly.”
The bank has been ordered to pay back customers affected by these practices and has faced penalties from both the CFPB and the OCC. Bank of America’s actions, including double-dipping on fees, opening unauthorized accounts, and withholding rewards, were deemed illegal and harmful to customer trust by CFPB Director Rohit Chopra.
Bank of America has voluntarily made changes to its policies, including reducing overdraft fees and eliminating non-sufficient fund fees. The bank has experienced a significant decline in revenue from these fees. Furthermore, Bank of America had falsely advertised and withheld cash and point rewards from tens of thousands of credit card customers, a practice that has been deemed illegal by the CFPB.
Since at least 2012, Bank of America employees have also opened credit card accounts for customers without their knowledge or consent, leading to unjust fees and negative impacts on credit scores.
Notably, Bank of America has faced previous penalties for illegal practices, including deceptive marketing and charging customers for services they never received. The recent enforcement actions by the CFPB demonstrate the importance of having a federal agency monitoring the financial marketplace to protect consumers from unfair practices.
“Bank of America is a repeat offender. Being a household name that has been punished before didn’t stop it from allegedly cheating customers out of tens of millions of dollars in fees and credit card rewards and opening up accounts without their authorization,” U.S. Public Interest Research Groups Consumer Campaign Director Mike Litt said in a statement Tuesday. “The Consumer Financial Protection Bureau’s strong enforcement action shows why it makes a difference to have a federal agency monitoring the financial marketplace day in and day out.”
It is worth mentioning that Bank of America was also fined in 2022 for unlawfully processing out-of-state garnishments and for automatically freezing customer accounts during the COVID-19 pandemic without lawful justification.