Compliance Blog

Oct 12, 2022

Spooky CFPB Enforcement Actions on Remittance Transfers and Overdraft Fees

It’s October! If you’re like me, you have already started decorating for Halloween. If you haven’t, it’s time to get into the spirit of things. In order to help you, I thought I would go over some spooky CFPB enforcement actions. Oooooo.

Spooky CFPB

CFPB’s Action Against Regions Bank

The first action I will be discussing is the CFPB’s enforcement action against Regions Bank. On September 28th, the CFPB filed a Consent Order in the action. According to the Consent Order, The CFPB found that Regions Bank charged “authorized-positive overdraft fees.” The CFPB provided the following example

“For example, a consumer starts with $100 in their checking account. The consumer makes five $10 purchases with their debit card. The next day, a $120 check that the consumer wrote posts to their account, bringing the consumer’s account negative and incurring a $36 overdraft fee. On day three, the five debit-card purchases settle, and all five of them also incur overdraft fees for a total of $180 in fees—specifically Authorized-Positive Overdraft Fees—even though the consumer had sufficient funds when they made the debit-card purchases and did not know or control when the debit card purchases would settle.”

According to the Consent Order, the CFPB found that Regions Bank knew that its overdraft policies were not clearly understood by the bank’s customers and that it was one of the hardest issues to resolve with customers. Ultimately, the CFPB found that Regions Bank’s practices were unfair and abusive.

Under the Consent Order, Regions Bank is prohibited from “assessing an overdraft fee on a transaction when the balance used to assess an overdraft fee was sufficient at the time the Bank authorized the transaction.” Regions Bank must also reserve $141,000,000 and develop a redress plan in order to reimburse affected customers. In addition to the reserve, Regions Bank is required to pay $50,000,000 to the CFPB as a civil money penalty.

Unless you’ve been sleeping in a coffin all year, you’ve likely heard about how the CFPB is targeting so called “junk fees,” which overdraft is included with. Credit unions that charge overdraft fees may want to review their overdraft program and, if you haven’t already, assess potential litigation/enforcement risks associated with the program.

CFPB’s Action Against Choice Money

The second action I will be discussing is the CFPB’s enforcement action against Choice Money Transfer, Inc. d/b/a Small World Money Transfer (Choice Money) for remittance transfer failures. On October 4th, the CFPB filed a Consent Order in the action. According to the Consent Order, the CFPB found that the Choice Money failed to:

·       Accurately disclose the date of funds availability;

·       Accurately disclose the exchange rate;

·       Accurately disclose transfer fees;

·       Issue consumer disclosures that used specified terms or “substantially similar” terms;

·       Adequately disclose key terms in written disclosures;

·       Refund certain fees after receiving a proper notice of error and determining that the error occurred;

·       Clearly and Conspicuously disclose the exchange rate;

·       Abide by the requirements for electronic disclosures;

·       Develop and maintain written policies and procedures for error resolution;

·       Follow required record retention rules;

Under the Consent Order, Choice Money has agreed to the following:

·       Stop certain prohibited conduct;

·       Implement and maintain written policies and procedures for compliance with the Electronic Funds Transfer Act (EFTA) and the remittance rule;

·       Maintain a compliance management system designed for compliance with EFTA and the remittance rule;

·       Develop and maintain a record retention system that is compliant with EFTA and the remittance rule;

·       Conduct training;

·       Develop and maintain audit functions to uncover deficiencies or violations of EFTA or the remittance rule;

·       Pay a civil money penalty of $950,000;

Credit union’s that conduct remittance transfers can benefit from a closer read of the Consent Order, as it discusses the violations and required conduct in much more depth and can help in any ongoing audit or review.

As October continues, the CFPB may continue to lurk in the shadows, possibly waiting to strike with another enforcement action. If that happens, the NAFCU Compliance Blog will be ready to provide our readers with all the gory details.


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About the Author

Keith Schostag, NCCO, Senior Regulatory Compliance Counsel, NAFCU


Keith Schostag joined NAFCU as regulatory compliance counsel in February 2021. In this role, Keith assists credit unions with a variety of compliance issues.

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