(Bloomberg) -- Bank of America Corp. agreed to pay $150 million in fines and $100 million to customers for improperly charging extra fees, withholding rewards and opening unauthorized credit-card accounts, US regulators said.
The Consumer Financial Protection Bureau said it fined the bank for “systematically double-dipping on fees imposed on customers with insufficient funds in their account.” The Charlotte, North Carolina-based lender also failed to pay promised credit-card reward bonuses and enrolled customers for cards without their knowledge or authorization, the CFPB said.
Bank of America agreed to pay $90 million of the penalty to the CFPB and $60 million to the Office of the Comptroller of the Currency. The company didn’t admit to or deny the allegations as part of the settlement.
The regulators have brought similar actions against Wells Fargo & Co. and U.S. Bancorp. San Francisco-based Wells Fargo has been under intense regulatory scrutiny for a raft of scandals dating back to 2016, including the opening of accounts without customers’ consent. More recently, the CFPB fined Minneapolis-based U.S. Bancorp $37.5 million for a similar practice.
“Bank of America wrongfully withheld credit-card rewards, double-dipped on fees and opened accounts without consent,” CFPB Director Rohit Chopra said in a statement Tuesday. “These practices are illegal and undermine customer trust.”
The consumer-protection agency found that Bank of America charged consumers a $35 overdraft fee and then “double-dipped” by allowing fees to be charged repeatedly for the same transaction, according to the statement. That allowed the bank to generate “substantial additional revenue,” the bureau said.
Fee Cutbacks
Bank of America said in an emailed statement that it “voluntarily reduced overdraft fees and eliminated all non-sufficient fund fees in the first half of 2022.” It declined to address the case or the allegations against the lender.
This isn’t Bank of America’s first recent regulatory penalty. A year ago, the lender was fined $225 million for unfair and deceptive practices related to a prepaid-card program to distribute unemployment insurance and other public-benefit payments during the pandemic. It was also ordered to pay a $10 million penalty and repay fees that the lender charged customers when garnishing wages.
Separately on Monday, the Securities and Exchange Commission announced a $6 million penalty settling charges against Bank of America’s Merrill Lynch unit for failing to file hundreds of Suspicious Activity Reports from 2009 to 2019. Merrill also agreed to pay another $6 million to settle related charges brought by the Financial Industry Regulatory Authority.
Bank of America, which also didn’t admit to or deny the SEC’s allegations, said it self-reported the issues to regulators. The firm, which merged with Merrill Lynch in 2009, said in an emailed statement that it has “enhanced our process and training regarding these filings.”
Bank of America shares rose 1.1% to $28.96 at 12:24 p.m. in New York. They’ve fallen 13% this year.
Charges Criticized
The bank announced in early 2022 it would cut back on the fees it charges customers for failing to have enough money in their accounts to cover checks and debit-card charges. Lawmakers and consumer activists have criticized the fees, with Senator Elizabeth Warren, a Democrat from Massachusetts, saying they “snatch billions from struggling families” and that “big banks raked in billions from this abusive practice” during the Covid-19 pandemic.
Bank of America didn’t completely eliminate overdraft fees, but took some steps to alleviate the impact on consumers. It did away with the transfer fee associated with its Balance Connect for overdraft-protection service and cut its overdraft fees. The lender considered removing overdraft charges completely, but ultimately opted for a reduced fee, executives have said.
The consumer-protection bureau also alleged that, dating back to 2012, Bank of America employees opened credit-card accounts for customers without their knowledge to reach sales goals imposed upon the workers. Those actions led to unjustified fees being charged and negative impacts on credit profiles, according to the statement. The sales incentives have since been removed, the agency said.
Rewards Withheld
The bank also withheld promised cash rewards or bonus points earned by tens of thousands of customers when signing up for Bank of America credit cards, regulators said.
“Bank of America has clearly broken the law in yet another case of Wall Street banks taking Americans’ money to pad their already massive profits,” Senator Sherrod Brown, a Democrat from Ohio, said in a statement.
In addition to the monetary penalties, the bank must change its business practices, by halting the practice of opening unauthorized accounts, disclosing limits on credit-card rewards and bonuses, and no longer charging repeat fees for non-sufficient funds.
--With assistance from Hannah Levitt.
