In Re: Bank of America N.A.
Date: July 11, 2023
Issue: Bank of America’s (BofA) consent orders with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) over nonsufficient funds (NSF) fees and credit card practices.
Case Summary: BofA agreed to pay $150 million in civil penalties to CFPB and OCC to resolve allegations related to its credit card rewards, overdraft policies, and sales practices.
CFPB and OCC alleged until 2021 and 2022, respectively, BofA charged consumers $35 NSF Fees each time the bank returned as unpaid a re-presented Automated Clearing House (ACH) transaction or check, despite already charging these consumers an NSF fee on the initial returned transaction. Additionally, from September 2018 to February 2022, CFPB and OCC alleged BofA generated hundreds of millions of dollars from its practice of charging multiple NSF fees on re-represented checks or ACH transactions.
CFPB found BofA’s charging of re-presentment NSF fees was an unfair act or practice in violation of the Consumer Financial Protection Act. CFPB claimed this practice caused substantial injury that consumers could not reasonably avoid. According to CFPB, consumers did not know when merchants would re-present transactions, nor could they generally stop payments or revoke authorizations on transactions easily in time. CFPB also found the substantial injury was not outweighed by any benefits to consumer or competition.
In addition, OCC noted BofA’s practice of charging either an NSF fee or an overdraft fee on re-presented transactions was an unfair and deceptive practice in violation of Section 5 of the FTC Act. OCC alleged BofA engaged in a deceptive practice because its disclosures contained materially misleading representations and omissions on re-presentment fees. Specifically, OCC asserted the disclosures did not inform customers they may be charged additional fees when a merchant resubmitted a transaction for payment. Instead, OCC alleged the bank’s disclosures explained consumers could be assessed an overdraft or insufficient funds fee of “$35 [for]each item.” According to OCC, the disclosures defined an “item” in a way that could have led a reasonable customer to think an “item” and a “transaction” were the same thing.
Under the consent orders, BofA agreed to provide consumers at least $80.4 million in total redress. BofA must also pay a $60 million civil money penalty to CFPB and a $60 million civil money penalty to OCC. The regulators also noted BofA already waived, refunded, or agreed to refund tens of millions of dollars to customers to whom it charged multiple re-presentment fees.
On credit card practices, CFPB found the bank engaged in deceptive acts or practices in violation of the CFPA in connection with promotions of rewards credit cards. For rewards credit cards, CFPB found that BofA’s marketing did not make clear that specific advertised bonuses were only limited to customers who applied for a rewards card online. According to CFPB, BofA did not provide the advertised bonuses to customers.
For credit card opening practices, CFPB also determined BofA unlawfully opened a small percentage of the bank’s new credit card accounts for consumers without their permission, in violation of the Truth in Lending Act. CFPB claimed this caused negative impacts to consumers’ credit reports, unjustified fees, and other harms. CFPB also claimed BofA employees opened these accounts to reach sales goals affecting their pay and performance evaluations. In addition, CFPB alleged BofA obtained consumer reports in connection with these applications in violation of the Fair Credit Reporting Act. The consent order requires BofA to pay a $30 million civil money penalty to CFPB and provide consumer redress, such as adjustments to rewards accounts.
Under the settlements, BofA agreed to provide consumers at least $80.4 million in total redress. BofA must also pay a $60 million civil money penalty to CFPB and a $60 million civil money penalty to OCC. The regulators also noted BofA already waived, refunded or agreed to refund tens of millions of dollars to customers to whom it charged multiple re-presentment fees.
Bottom Line: BofA did not admit any wrongdoing in agreeing to the consent orders.