Federal regulators announced on Tuesday that they have determined that Bank of America harmed its customers by double-dipping on fees, withholding credit card rewards, and opening phony accounts, all of which violate various consumer financial protection laws.
Serving 68 million individuals and small enterprises, this bank is the second largest in the United States.
Some of the charges resemble the Wells Fargo scandal that happen several years ago, in which millions of bank accounts were opened without consumer consent.
“Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent,” CFPB Director Rohit Chopra said in a statement.
“These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system.”
Bank of America, according to the CFPB, “harmed hundreds of thousands of consumers over a period of several years and across multiple product lines and services.”
The CFPB and OCC discovered, among other things, that the bank, which normally charged customers $35 if their transaction was declined due to insufficient funds, allowed those fees to be “repeatedly charged” for the same transaction, resulting in “tens of millions of dollars in fees on resubmitted transactions,” according to the OCC.
This would occur if a third-party merchant resubmitted the charge to the customer’s account, which may still have had insufficient funds to cover the expense, after the initial transaction was declined. The consumer would then be charged either a $35 insufficient funds fee or a $35 overdraft fee.
“The bank’s disclosures did not make it obvious that multiple fees may result from a single transaction. In addition, customers had no way of knowing when or if a merchant would resubmit a transaction to the bank for payment, making it impossible for them to avoid being charged multiple times for the same transaction, according to the OCC’s statement.
According to CNN, last year, Bank of America sent them an email that these fees were eliminated. “During the first half of 2022, we voluntarily reduced overdraft fees and eliminated all fees for insufficient funds. Because of these industry-leading adjustments, revenue from these fees has decreased by more than 90 percent,” according to a spokesperson.
The CFPB also alleged that the bank made special offers of cash and points when signing up new credit card customers, but unlawfully withheld these bonuses from tens of thousands of cardholders. In order to meet now-defunct sales-based incentive objectives and improve their evaluations, bank employees “illegally applied for and enrolled consumers in credit card accounts without consumers’ knowledge or consent” beginning at least in 2012, according to the agency.
This entailed using or obtaining consumers’ credit reports without their assent, which resulted in customers being charged unjustified fees, receiving negative marks on their credit reports, and having to make efforts to correct the bank’s errors.
Fines Bank of America must pay
As a consequence of the violations announced by regulators on Tuesday, Bank of America will be responsible for paying over $250 million to the agencies and affected customers. This is not the first time the bank has been fined by regulators. Moreover, those recorded on Tuesday are less than those reported previously.
In 2014, the CFPB ordered it to pay $727 million to consumers as compensation for unlawful credit card practices. In 2013, it was ordered to pay a $10 million civil penalty for unconstitutional garnishments and $225 million to consumers for “mishandled disbursement of state unemployment benefits during the height of the COVID-19 pandemic.”
Are you eligible for payment
According to the CFPB, if you believe you were affected by the double-charging of fees violation or the false account violation, you do not need to take any action to receive your payment.
Bank of America will be responsible for sending remittances to all eligible recipients.
Either funds will be deposited into your deposit account or a check will be mailed to you. According to the CFPB, the credit card customers who were promised rewards that were not delivered have already been compensated, so it is not mandating that Bank of America provide additional remediation for this group.
Later this month, the CFPB will publish on its website the Bank of America contact information for additional consumer inquiries.