The Office of the Comptroller of the Currency (OCC) has recently assessed a $60 million civil money penalty against Bank of America, N.A., for violations of law related to its overdraft program. The OCC found that the bank charged customers multiple overdrafts and insufficient funds fees for a single transaction, resulting in tens of millions of dollars in fees. This article delves into the OCC’s findings, the implications of the civil money penalty, and the importance of fair and transparent practices in the banking industry.
Understanding the Violations Resulting in Civil Money Penalty
The OCC’s investigation revealed that Bank of America engaged in the practice of assessing multiple overdrafts and insufficient funds fees against customers for the same transaction. When customers’ deposit accounts had insufficient funds for a payment, the bank typically charged them an insufficient funds (NSF) fee. However, in instances where third-party merchants resubmitted checks or automated clearing house (ACH) transactions for payment, Bank of America would either charge an additional $35 NSF fee or pay the transaction and impose a $35 overdraft fee. This practice resulted in customers being charged multiple fees for a single transaction.
Violating the Federal Trade Commission Act
The OCC found that Bank of America’s practices violated Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices. The bank’s disclosures did not clearly explain the possibility of multiple fees resulting from the same transaction. Consequently, customers had no way of knowing if a merchant would resubmit a transaction for payment, and they could not reasonably avoid being charged multiple fees. Such practices were deemed unfair to consumers and in violation of the law.
The Impact on Consumers
The excessive and undisclosed fees imposed by Bank of America had a significant impact on consumers. Many customers faced financial strain and unexpected charges due to the bank’s overdraft program practices. The lack of transparency and clear disclosures prevented customers from making informed decisions about their transactions, leading to further financial hardship.
Bank of America’s Response
In response to supervisory concerns, Bank of America has taken steps to address the issue. The bank has waived, refunded, or agreed to refund tens of millions of dollars to customers who were harmed by the practice of charging multiple fees for the same transaction. This effort to rectify the situation is a step towards addressing the harm caused to affected consumers.
Acting Comptroller of the Currency, Michael J. Hsu, emphasized the OCC’s commitment to protecting consumers and promoting fairness and trust in the banking industry. Overdraft programs are intended to assist customers, not burden them with excessive fees. The OCC’s enforcement action demonstrates that financial institutions must operate in compliance with all applicable laws and standards, ensuring that consumer interests are safeguarded.
The OCC’s civil money penalty order is part of a coordinated effort with the Consumer Financial Protection Bureau (CFPB). The CFPB also announced a consent order against Bank of America, directing the bank to redress customers harmed by its practices. This joint approach reinforces the seriousness of the violations and sends a clear message that financial institutions must be held accountable for their actions.
Transparency and Consumer Empowerment
The OCC’s action against Bank of America highlights the importance of transparency in the banking industry. Customers must have access to clear and comprehensive disclosures about fees, charges, and the potential consequences of financial transactions. Transparent communication empowers consumers to make informed decisions, enabling them to manage their finances effectively and avoid unexpected costs.
The OCC and the CFPB play a critical role in protecting consumers’ interests and upholding the integrity of the banking industry. Regulatory authorities monitor financial institutions to ensure compliance with laws and regulations that safeguard consumers. When violations occur, regulatory action is taken to hold institutions accountable and provide restitution to affected consumers.
The OCC’s $60 million civil money penalty against Bank of America serves as a powerful reminder that financial institutions must prioritize fairness, transparency, and consumer protection. The violations related to the bank’s overdraft program underscore the importance of clear disclosures and consumer empowerment in the financial sector. The joint effort with the CFPB reinforces the commitment of regulatory authorities to safeguarding consumers’ interests and promoting trust in the banking industry. As the banking landscape continues to evolve, regulatory agencies will remain vigilant in upholding the highest standards of financial privacy, security, and transparency.