CFPB Hits Bank of America for Junk Fees, Withholding Card Awards, and Opening Fake Accounts

Earlier this month, the Consumer Financial Protection Bureau (“CFPB”) announced it was entering into multiple consent orders with Bank of America (collectively, the “Orders”) in connection with its consumer account programs. The Orders impose $150 million in penalties against Bank of America ($90 million payable to the CFPB, $60 million payable to the OCC), on top of an obligation to repay affected consumers an additional $100 million.

The basis of the Orders were a number of practices engaged in by Bank of America with respect to its consumer accounts that the CFPB cited as illegal, including the following:

Repeated NSF Fees: The Orders note that Bank of America had a practice of assessing a $35 fee on transactions that were declined due to insufficient funds. The Orders accuse Bank of America of “double dipping” on this fee by charging it multiple times in connection with the same transaction and, specifically, on re-presented checks and ACH transactions.

Credit Card Points: Like many providers, Bank of America competes for credit card business by offering prospective customers sign-up bonuses and other inducements. The Orders charge that Bank of America failed to provide the promised bonuses and inducements to many of its cardholders. This included instances where Bank of America’s business processes and systems failed, causing it to deny customers their promised sign-up bonuses.

Other instances cited in the Orders involved the terms and conditions and marketing materials underpinning the sign-up bonuses and inducements, which the CFPB said were unclear. In particular, while Bank of America intended to limit certain of its sign-up bonuses to credit card applications submitted online, this limitation was not adequately disclosed in either the marketing materials or the terms and conditions. This lack of clarity led consumers to reasonably believe they would receive the advertised sign-up bonus by submitting a credit card application in person or over the telephone.

 Opening Fake Accounts: Finally, in an echo of the issues that resulted in record setting penalties against Wells Fargo in 2016, the Orders also accuse Bank of America employees of illegally opening accounts without the knowledge of customers in order to meet certain sales-based incentive goals and evaluation criteria (which have subsequently been discontinued).

Take Away
The Orders serve as a good reminder for providers to review their practices and policies to ensure they do not engage in the cited illegal conduct. In particular, providers should review instances where they assess an NSF fee to determine whether such fees are imposed multiple times based on the re-presentment of a single transaction.

In addition, providers offering rewards programs that offer sign-up bonuses and other inducements should closely review their marketing materials and terms and conditions to ensure that any conditions or limitations in connection with the bonus or inducement are clearly and conspicuously disclosed.

Additional information on the CFPB’s enforcement action against Bank of America, including links to both Orders, can be found here.