Today, the Consumer Financial Protection Bureau (CFPB) has taken action against Bank of America for engaging in illegal activities that harmed its customers. The bank has been ordered to pay over $100 million to affected consumers and an additional $150 million in penalties to the CFPB and the Office of the Comptroller of the Currency (OCC).
Bank of America, one of the largest banks in the United States, has been found guilty of several violations. These include imposing excessive fees on customers with insufficient funds in their accounts, withholding rewards promised to credit card holders, and opening fraudulent accounts without customers’ knowledge or consent. The OCC has also deemed the bank’s fee practices to be illegal. As a result, Bank of America will pay $90 million in penalties to the CFPB and $60 million in penalties to the OCC.
Wells Fargo also faced a scandal involving the opening of fake accounts. In 2016, it was revealed that the bank had created millions of unauthorized accounts on behalf of its customers without their knowledge or consent. The accounts were opened in order to meet aggressive sales targets and boost employee incentives. This unethical practice led to customers being charged fees for accounts they never requested, as well as negative impacts on their credit scores. The scandal resulted in significant financial penalties, executive resignations, and damage to Wells Fargo’s reputation. The incident served as a stark reminder of the importance of maintaining trust and ethical practices in the banking industry.
CFPB Director Rohit Chopra condemned the bank’s actions, stating, “Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent. These practices are illegal and undermine customer trust. The CFPB is committed to ending such practices across the banking system.”
Bank of America’s misconduct affected hundreds of thousands of consumers across multiple product lines and services. The specific violations include the following:
- Double-dipping on fees: The bank charged customers $35 for insufficient funds in their accounts. However, it was discovered that Bank of America repeatedly imposed these fees for the same transaction, generating significant additional revenue over several years.
- Withholding credit card rewards: The bank failed to honor its promises of cash and points rewards for tens of thousands of credit card holders. Customers who applied in person or over the phone were denied their sign-up bonuses due to the bank’s faulty processes and systems.
- Opening unauthorized accounts: Bank of America employees misused sensitive customer information to open credit card accounts without customers’ consent. This unethical practice allowed the bank to meet sales-based goals, but it resulted in unjustified fees, negative impacts on credit profiles, and wasted time for affected consumers.
- This is not the first time Bank of America has faced enforcement actions for unlawful practices. In the past, the bank has been ordered to pay significant amounts in redress to victims of illegal credit card practices and unlawful garnishments. The mishandling of state unemployment benefits during the COVID-19 pandemic also led to substantial fines and compensatory measures.
In response to these violations, the CFPB has issued orders requiring Bank of America to take the following actions:
- Cease repeat offenses: The bank must stop opening unauthorized accounts and disclose any limitations on rewards card bonuses. It is strictly prohibited from charging repeat non-sufficient funds fees in the future.
- Provide redress to affected consumers: Bank of America is obligated to compensate customers who were unlawfully charged non-sufficient funds fees, those who suffered costs from unauthorized credit card accounts, and customers who were wrongfully denied bonuses.
- Pay penalties: The bank will pay a total of $90 million in penalties to the CFPB for its fee practices and unauthorized accounts, while an additional $60 million will be paid to the OCC for double-dipping fees.
Original notice here.
As the Editor of The Gershman Group, a boutique financial services consulting firm, TGG brings expertise in financial analysis, strategic planning, and market research. With a keen eye for detail and a passion for helping businesses navigate complex financial landscapes, TGG delivers insightful, high-quality content to empower informed decisions. Backed by years of industry experience, TGG makes complex topics accessible through clear and compelling communication, shaping the firm’s thought leadership and commitment to excellence in financial services.
