The US Consumer Financial Protection Bureau has launched a crackdown on a range of so-called ‘junk fees’ that it says lenders unfairly charge customers.
Bank of America on Tuesday agreed to pay $250m in fines and compensation to settle claims that the bank systematically double-charged customers fees, withheld promised credit card perks, and opened accounts without customer authorisation.
Bank of America agreed to pay $100m in restitution to harmed consumers and another $150m in civil penalties after the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) said the bank violated a number of United States laws beginning in 2012.
Bank of America reaped hundreds of millions of dollars by charging multiple fees to customers who did not have enough funds in their accounts from February 2018 until February 2022, the CFPB said in a statement. Consumers could not reasonably expect or understand they would be hit with $35 fees each time the bank declined to pay a single transaction, regulators said.
In a statement, Bank of America said it voluntarily eliminated or reduced a range of fees last year.
The CFPB has launched a crackdown on a range of so-called “junk fees,” including overdraft and insufficient fund fees that it says lenders unfairly charge customers for banking services.
“These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system,” CFPB Director Rohit Chopra said in a statement.
Under sales pressure or seeking rewards, Bank of America employees illegally applied for and enrolled consumers, without their knowledge, in credit card accounts from at least 2012, the CFPB said. The accounts represented a “small percentage” of new accounts at the bank, regulators said.
The bank, based in Charlotte, North Carolina in the US, also failed to make good on cash rewards and bonus points promised to tens of thousands of credit card customers, according to the CFPB.
In addition to paying penalties of $90m to the CFPB and $60m to the OCC, the bank agreed to update regulators on its compliance progress in a 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,” Bank of America said in a statement.
Democratic Senator Sherrod Brown described the case as an example of US banks padding their profits with Americans’ money.
“This is just the latest in a long line of illustrations of why we can’t trust Wall Street to do the right thing,” he said.
Separately, Bank of America’s financial advisory arm Merrill Lynch, Pierce, Fenner & Smith agreed to pay $12m in penalties to the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) for failing to file hundreds of suspicious activity reports to regulators from January 2009 to November 2019.
Merrill discovered the issue in 2019, according to the SEC’s order.
“Following an internal review, we reported this matter to regulators and have enhanced our process and training regarding these filings,” the bank said in a statement on the matter.
Bank of America shares were up 1.1 percent by 2:02pm ET (18:02 GMT), recovering losses seen in early trading.