Federal regulators have issued an order for Bank of America to pay more than $100 million to customers due to illegal charging of junk fees, withholding credit card rewards, and opening fake accounts. The Consumer Financial Protection Bureau (CFPB) stated that the bank must also pay an additional $90 million in penalties to the CFPB and $60 million to the Office of the Comptroller of the Currency.
Illegal Charging of Fees
The CFPB accused Bank of America of causing harm to hundreds of thousands of consumers over several years by double-dipping on fees imposed on customers with insufficient funds. This practice was deemed illegal by the Office of the Comptroller of the Currency.
Overdraft Fee Controversy
Historically, the bank charged a $35 overdraft fee when a transaction was declined due to insufficient funds. However, the CFPB accused Bank of America of allowing fees to be repeatedly charged for the same transaction, resulting in multiple $35 fees being levied on customers.
Bank of America has stated that it has not been charging the extra fee for the past 18 months. In 2022, the bank eliminated all fees except the overdraft fee, which was reduced from $35 to $10. As a result, revenue from these fees has dropped by over 90%.
Withholding Credit Card Rewards
The CFPB also accused the bank of illegally withholding promised credit card account bonuses from tens of thousands of customers who applied over the phone or in person. The bank was also accused of enrolling consumers in credit card accounts without their knowledge or authorization since at least 2012.
Bank of America employees allegedly used consumers’ credit reports without permission to complete credit card applications, leading to unjustified fees, negative effects on credit profiles, and the need for consumers to spend time correcting errors.
Bank of America’s Response
Bank of America serves 68 million people and small business clients. The bank has responded to the accusations by stating that it voluntarily reduced overdraft fees and eliminated non-sufficient fund fees in the first half of 2022. The bank claims that it has seen a significant drop in revenue from these fees as a result.
The order for Bank of America to pay over $100 million in restitution and penalties highlights the illegal practices related to junk fees, credit card rewards withholding, and unauthorized accounts. While the bank claims to have taken steps to address these issues, the regulatory action underscores the importance of fair and transparent practices in the financial industry.