.png)
.png)
The Consumer Financial Protection Bureau (CFPB) fined Regions Bank $191 million for allegedly charging customers illegal, unexpected overdraft fees.
According to the CFPB's consent order filed Wednesday, the bank, which has $161 billion in assets and approximately 1,300 offices across the South and Midwest, charged customers overdraft fees on certain ATM withdrawals and debit card purchases even though they had sufficient funds in their accounts at the time of the transaction.
The $36 overdraft fee, known as "approved positive," was levied if a customer's bank balance became insufficient when the transaction posted, which might take several days. Such costs are deemed unjust because the bank enables the transaction to proceed while customers are not informed of the fees and are unable to avoid them.
Bank card purchases made by signature normally take 1-3 days for monies to be withdrawn from a bank account. If the individual continued to withdraw funds from his or her account, there may not be enough funds to cover the original transaction when the monies are withdrawn.
Banking regulators have issued general warnings to the banking industry about authorized-positive fees. In 2015, the CFPB fined Regions $7.5 million for collecting overdraft fees.
According to the CFPB's order issued on Wednesday, Regions levied the authorized-positive fees on customers from August 2018 through July 2021, earning nearly $141 million.
According to the CFPB, the bank assessed a separate $36 fee for each transaction posted on an account with insufficient funds, regardless of whether the account had enough money at the time of the purchase.
According to the CFPB, many clients did not comprehend Regions' overdraft policies and were unable to avoid the costs.
The CFPB stated in a news release that regions "used sophisticated and counter-intuitive overdraft methods and manipulations" that made it difficult for customers to avoid the penalties. The bank's executives knew the fees were illegal and should not have authorised them, according to the agency.
According to the settlement agreement, Regions' senior management resolved to halt the application of the fees in July 2019, but did not follow through until the bank implemented measures that created new overdraft fees to offset the estimated revenue that would be lost.
The bank's compliance staff advised it would be less vulnerable if it eliminated authorized-positive overdraft fees "with timeliness and urgency," but the bank ignored the recommendation, according to the CFPB.
According to the CFPB, compliance employees advised the bank that regulators would most likely expect it to return the costs to clients.
“Regions Bank raked in tens of millions of dollars in surprise overdraft fees every year, even after its own staff warned that the bank’s practices were illegal,” said CFPB Director Rohit Chopra in the press release. “Too often, large financial firms make a calculation that continuing to break the law is more profitable than following it. We have more work to do to change this mentality.”
The CFPB has ordered that regions pay at least $141 million in reparations and deliver $50 million to the CFPB's victims relief fund.
Within 90 days of signing the order, the bank must provide to the CFPB a written compliance status report certified by the bank board that specifies each consumer eligible for redress and the amount to be paid.
“Although Regions Bank disagrees with the CFPB’s characterizations, the bank cooperated with the investigation and is pleased to move forward,” the bank said in a statement on its website.
“Over a year ago, Regions stopped charging this particular overdraft fee,” stated Regions Chief Legal Officer Tara Plimpton. “We took this action as part of a broader series of enhancements.”
By fLEXI tEAM