Bank of America hit with $250M fines, refunds
Bank of America, one of the biggest banks in the US, has been slammed with $250 million in fines and reimbursement to customers by the Consumer Financial Protection Bureau, (CFPB). The bank will pay more than $100 million as reimbursement to its customers and pay $150 million in fines for “double-dipping” on overdraft fees, withholding reward bonuses on credit cards and opening accounts without customer consent.
According to Rohit Chopra, CFPB Director, Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent.” He said further that “These practices are illegal and undermine customer trust.” He therefore announced that Bank of America must refund $100 million to customers, pay $90 million in penalties to the Consumer Financial Protection Bureau and $60 million to the Office of the Comptroller of the Currency.
Combined, it is one of the highest financial penalties in years against Bank of America, which has largely spent the last 15 years trying to clean up its reputation and market itself to the public as a bank focused on financial health and not on overdraft fee income and financial trickery.
Empowered by a broad mandate from the White House, Chopra and the Bureau have focused heavily in the past year on the issue of “ junk fees ” — fees charged to Americans that are often seen as unnecessary or exploitative by banks, debt collectors, airlines and concert venues. Banks such as BofA, JPMorgan Chase, Wells Fargo and others have been a target for the Bureau under the Biden administration.
Part of the fines and penalties come because Bank of America had a policy of charging customers $35 after the bank declined a transaction because the customer did not have enough funds in their account, the CFPB said. The agency determined that the bank double-dipped by allowing fees to be repeatedly charged for the same transaction.
The fees often came when customers had routine monthly transactions, like a gym membership. If a customer had too low of a balance to cover the transaction, it would be declined and BofA would charge the customer a $35 fee. The business, who hasn’t been paid, often would recharge the customer’s account, resulting in another $35 non-sufficient funds fee.
The bank ended this practice last year, but will still have to repay customers who got charged before the policy was changed.
The CFPB also found that, since at least 2012, Bank of America employees illegally applied for and enrolled consumers in credit card accounts without their knowledge or authorization. It is a similar to, but smaller than, a charge that was made against Wells Fargo, which paid billions in fines after it was determined that the San Francisco bank opened millions of unauthorized bank accounts in order to meet unrealistic sales goals.
In 2014 the CFPB ordered Bank of America to pay $727 million for illegal credit card practices. Last year it was ordered to pay a $10 million civil penalty over unlawful garnishments. Also in 2022, the CFPB and OCC fined Bank of America $225 million and required it to pay hundreds of millions of dollars in redress to consumers for botched disbursement of state unemployment benefits at the height of the COVID-19 pandemic.
Bank of America also offered people cash rewards and bonus points when signing up for a card, but the CFPB said the bank illegally withheld promised credit card account bonuses.
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