Bank of America Fined $150 Million Over ‘Junk Fees’ and Fake Accounts

Bank of America withheld promised perks from a few of its bank card prospects, double-charged overdraft charges and secretly opened card accounts in prospects’ names with out their information or consent, federal regulators mentioned on Tuesday.

The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, which oversee the banking business, levied $150 million in fines towards the nation’s second-largest financial institution over what they referred to as “junk fees” that it was charging prospects, in addition to its mishandling of buyer accounts. Some prospects paid $35 in overdraft charges a number of instances on a single transaction they requested from an account that had inadequate funds.

As a part of the buyer bureau’s motion, the financial institution will repay greater than $80 million to prospects who had been improperly charged charges or denied sign-on bonuses, and can compensate prospects who had playing cards opened of their names with out their information.

The practices got here to mild as a part of an industrywide examination, ordered by President Biden in 2022, of the charges that firms had been charging prospects. Bank of America ended the practices described in Tuesday’s actions in 2021 and 2022, in line with the regulators.

“These practices are illegal and undermine customer trust,” Rohit Chopra, the director of the buyer bureau, mentioned in a press release. “The C.F.P.B. will be putting an end to these practices across the banking system.”

Regulators mentioned Bank of America had imposed improper overdraft charges by double-charging prospects over the identical transaction. The first cost could be a $35 “insufficient funds” penalty levied towards a buyer who tried to pay for one thing by verify or automated transaction with out having the funds vital to take action. The transaction could be declined, but when the service provider attempting to gather the cash resubmitted a request for fee, the cash would undergo and one other $35 cost would hit the client’s account, this time as an overdraft price, or it could be denied once more, incurring a second “insufficient funds” price.

A Bank of America spokesman mentioned the financial institution had “voluntarily” decreased overdraft charges from $35 to $10 in early 2022 and had eradicated its $35 “insufficient funds” penalty. It has since seen a 90 p.c drop in income from such charges, the spokesman mentioned.

In addition to the motion on overdraft charges taken collectively by the 2 regulators, the buyer bureau mentioned it had found two different areas the place the financial institution was mistreating prospects. For some prospects who had been enticed into opening new bank card accounts, the bureau discovered that Bank of America had not supplied the sign-up bonuses it had promised to prospects who opened accounts on the cellphone or in particular person as a substitute of on-line.

The bureau additionally mentioned it had uncovered some situations of Bank of America workers opening new playing cards in prospects’ names with out their information or consent with a purpose to meet gross sales targets.

These pretend accounts appeared to make up solely “a small percentage” of Bank of America’s new accounts, in line with the buyer bureau. By comparability, such practices had been widespread at Wells Fargo, resulting in years of investigations by federal and state authorities that resulted in billions of {dollars} in penalties.

The regulators’ actions characterize a big transfer towards a single establishment over “junk fees,” however not the biggest. In December, the buyer bureau introduced its largest-ever motion towards a financial institution with a $3.7 billion case towards Wells Fargo over such charges. In September, the bureau ordered Regions Bank, a midsize lender, to pay $50 million right into a victims’ aid fund and refund its prospects $141 million in overdraft charges.

The banking business has been attempting not too long ago to pre-empt regulatory crackdowns over buyer charges. Several of the biggest U.S. banks introduced adjustments to their overdraft insurance policies in late 2021 and early 2022. Trade teams later argued that the adjustments banks made on their very own meant that no new legal guidelines or laws governing overdraft charges had been vital.

“These reforms from the nation’s largest banks have occurred without regulatory or legislative intervention and collectively represent a transformational moment in time for the industry,” Lindsey Johnson, the president of the Consumer Bankers Association, a lobbying group, wrote in an opinion piece in September.