Bank of America withheld promised privileges from some credit card customers, charged double overdraft fees and opened card accounts in customers' names without their knowledge or consent, U.S. banking regulators said on July 11.
Accordingly, Bank of America will have to pay $100 million in restitution to consumers and another $150 million in civil penalties, according to the Consumer Financial Protection Bureau (CFPB) and the US Office of the Comptroller of the Currency (OCC).
From February 2018 to February 2022, the bank made hundreds of millions of dollars by charging multiple fees to customers who did not have enough money in their accounts, the CFPB said in a statement.
Specifically, Bank of America charges twice for the same transaction. The first fee, $35, is an “insufficient funds” penalty, which is imposed on a customer who attempts to make a payment without having enough money in their account. That transaction is declined, but if the customer sends another request for payment, they are charged another $35, called an overdraft fee.
“These practices are illegal and erode consumer confidence. The CFPB will put an end to these practices across the banking system,” CFPB Director Rohit Chopra said in a statement.
Bank of America is the second largest bank in the US (after JP Morgan), serving 68 million individuals and small businesses. Photo: Bloomberg
A Bank of America spokesperson said the bank “voluntarily” reduced its overdraft fee from $35 to $10 and eliminated its “insufficient funds” penalty in early 2022. Since then, revenue from those fees has dropped 90%.
Since at least 2012, Bank of America employees have signed up and opened new card accounts without customers' notice or consent in order to generate sales or earn rewards, the CFPB said.
For some customers enticed to open new credit card accounts, Bank of America also isn't offering the rewards points it promised to tens of thousands of customers who opened accounts over the phone or in person instead of online.
This is not the first time the second largest bank in the US has been fined under the law. In 2014, the CFPB ordered the bank to pay $727 million to compensate consumers for illegal credit card use.
In 2022, Bank of America will also pay a $10 million civil penalty related to illegal account freezes and $225 million in consumer restitution for failing to ensure financial assistance to customers under unemployment benefits and other government welfare programs at the height of the Covid-19 pandemic .
Nguyen Tuyet (According to NY Times, Al Jazeera, CNN)
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