Newsroom
April 28, 2015
CFPB fines bank $7.5M for illegal overdraft practices
In its first enforcement action under a 2010 "opt-in" rule on overdraft, CFPB fined Alabama-based Regions Bank $7.5 million for failing to ask consumers if they wanted to be enrolled in overdraft services before charging them overdraft fees.
"The 2010 Federal Reserve overdraft ‘opt-in' rule is critically important," CFPB Deputy Enforcement Director Cara Petersen said in a statement on yesterday's action. "It prohibits depository institutions from charging an overdraft fee for ATM withdrawals and one-time debit card transactions unless the consumer has affirmatively ‘opted in.'" CFPB said Regions Bank has already refunded hundreds of thousands of consumers approximately $49 million in fees. It said the consent order requires the bank to fully refund all remaining consumers and to correct errors on consumers' credit reports.
Petersen said the bank didn't apply the opt-in rule in situations where consumers had two Regions accounts linked to each other. If one account couldn't cover the transaction, the bank would dip into the second account. If the second account didn't have enough funds for the transaction, the bank would pay the transaction and charge an overdraft fee of up to $36. In many cases, the bank did not obtain the required consent.
The overdraft opt-in rule was set by the Fed and later transferred to CFPB when it received regulatory authority over financial consumer protections. NAFCU weighed in with the Fed as well as CFPB on the rule and its impact on credit union members.
Yesterday, NAFCU Director of Regulatory Affairs Alicia Nealon touted credit unions' regulatory compliance efforts and their steady focus on members' needs. "Credit unions have a long track record of regulatory compliance and a steadfast commitment to providing exemplary member service," said Nealon. "We continue to engage with CFPB as it examines overdraft practices to ensure that credit unions are able to continue to provide the services their members demand."
"The 2010 Federal Reserve overdraft ‘opt-in' rule is critically important," CFPB Deputy Enforcement Director Cara Petersen said in a statement on yesterday's action. "It prohibits depository institutions from charging an overdraft fee for ATM withdrawals and one-time debit card transactions unless the consumer has affirmatively ‘opted in.'" CFPB said Regions Bank has already refunded hundreds of thousands of consumers approximately $49 million in fees. It said the consent order requires the bank to fully refund all remaining consumers and to correct errors on consumers' credit reports.
Petersen said the bank didn't apply the opt-in rule in situations where consumers had two Regions accounts linked to each other. If one account couldn't cover the transaction, the bank would dip into the second account. If the second account didn't have enough funds for the transaction, the bank would pay the transaction and charge an overdraft fee of up to $36. In many cases, the bank did not obtain the required consent.
The overdraft opt-in rule was set by the Fed and later transferred to CFPB when it received regulatory authority over financial consumer protections. NAFCU weighed in with the Fed as well as CFPB on the rule and its impact on credit union members.
Yesterday, NAFCU Director of Regulatory Affairs Alicia Nealon touted credit unions' regulatory compliance efforts and their steady focus on members' needs. "Credit unions have a long track record of regulatory compliance and a steadfast commitment to providing exemplary member service," said Nealon. "We continue to engage with CFPB as it examines overdraft practices to ensure that credit unions are able to continue to provide the services their members demand."
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