Bank of America has been fined $150 million by federal regulators for withholding promised perks from credit card customers, double-charging overdraft fees, and secretly opening card accounts without customers’ knowledge or consent. The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau stated that the bank charged customers “junk fees” and mishandled their accounts.
According to the regulators, some customers were charged overdraft fees multiple times on a single transaction when there were insufficient funds in their accounts. As part of the fine, Bank of America will repay over $80 million to customers who were improperly charged fees or denied sign-on bonuses. The bank will also compensate customers who had accounts opened in their names without their knowledge.
These practices were brought to light during an industrywide examination ordered by President Biden in 2022 to investigate the fees charged by companies. Bank of America has ceased these practices since 2021 and 2022, according to regulators.
Rohit Chopra, the director of the Consumer Financial Protection Bureau, denounced these practices, calling them illegal and damaging to customer trust. He stated that the bureau would put an end to such practices in the banking system.
One of the improper practices identified by the regulators was Bank of America’s double-charging of customers for overdraft fees. Customers would be charged a $35 insufficient funds penalty when attempting to pay for something without sufficient funds. If the merchant re-submitted the request for payment, the customer’s account would be charged another $35 as an overdraft fee.
The bank claimed to have voluntarily reduced its overdraft fees from $35 to $10 in early 2022 and eliminated the $35 insufficient funds penalty. Since then, the bank has experienced a 90 percent drop in revenue from such fees, according to a bank spokesman.
Apart from the overdraft fees, the Consumer Financial Protection Bureau discovered two additional areas where Bank of America mistreated customers. Some customers who opened new credit card accounts did not receive the sign-up bonuses promised by the bank. Additionally, the bureau found instances where bank employees opened new cards in customers’ names without their knowledge or consent to meet sales goals.
However, the bureau stated that these unauthorized accounts made up only a small percentage of Bank of America’s new accounts. In comparison, similar practices were widespread at Wells Fargo, leading to extensive investigations and hefty penalties.
While the regulators’ actions represent a significant move against Bank of America for “junk fees,” they are not the largest. In December, the Consumer Financial Protection Bureau imposed its largest-ever action, a $3.7 billion case, against Wells Fargo for similar fees. In September, the bureau ordered Regions Bank to pay $50 million and refund customers $141 million in overdraft fees.
In recent years, the banking industry has been proactively addressing customer fee concerns to preempt regulatory crackdowns. Several major U.S. banks announced changes to their overdraft policies in 2021 and 2022. Industry trade groups argue that these self-imposed reforms render new laws or regulations unnecessary.
Lindsey Johnson, the president of the Consumer Bankers Association, applauded these reforms, stating that they represent a transformational moment for the industry. However, the recent actions against Bank of America suggest that regulatory oversight remains necessary to ensure fair treatment of customers and prevent abusive practices.