CFPB Orders Bank of America to Pay $100 Million for Illegal Practices

The Consumer Financial Protection Bureau (CFPB) has issued a penalty to the Bank of America ordering them to pay more than $100 million for imposing double fees on customers with insufficient funds in their accounts, restricting reward payments to credit card customers, and opening accounts with a client's personal information without informing them.

The bank's double-dipping on fees was also illegal according to the Office of the Comptroller of the Currency (OCC)—with all the allegations placed on the Bank of America, it's expected that the bank will pay a total of $90 million due to the  CFPB penalties and $60 million in OCC penalties.

Statement on the issue by CFPB: "Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent," said Consumer Financial Protection Bureau Director Rohit Chopra. "These are illegal practices that undermine customer trust." The CFPB will put a stop to these practices throughout the banking industry."

• Bank of America (NYSE: BAC) is an international bank that serves a total of 68 million individuals including small businesses.  The bank has $2.4 trillion in consolidated assets and $1.9 trillion in domestic deposits as of March 31, 2023, making it the second-largest bank in the United States.

In the past up till these sanctions, Bank of America has injured hundreds of thousands of customers across a variety of product lines and services. These are what the Bank of America has done in particular:

Bank of America Used a Double-Dipping Method to Collect Heavy Fees: the bank charged clients $35 after the bank denied a transaction because the customer did not have enough cash in their account. The CFPB inquiry discovered that Bank of America double-dipped by charging fees for the same transaction several times. Bank of America made extra money over several years by fraudulently collecting several $35 fees.

Credit Card Rewards Withheld: To compete with other credit card firms, Bank of America targeted individuals with specific offers of cash and points when signing up for a credit card. Bank of America improperly withheld from thousands of customers promised credit card account benefits, such as cash rewards or bonus points. The bank failed to keep commitments made to customers who applied in person or over the phone. Due to the failure of Bank of America's business procedures and systems, the bank also rejected sign-up incentives for customers.

Misused Sensitive Customer Information to Open Unauthorized Accounts: Beginning in 2012, Bank of America employees illegally applied for and enrolled consumers in credit card accounts without their knowledge or authorization to meet now-disbanded sales-based incentive goals and evaluation criteria. In several situations, Bank of America utilized or accessed credit records from individuals without their consent to complete applications. Customers were charged unjustifiable fees, had negative repercussions on their credit reports, and had to spend time rectifying inaccuracies as a result of Bank of America's activities.

This is not the first time Bank of America has faced enforcement action for improper activities in its consumer business. 

• The CFPB ordered Bank of America to pay $727 million in restitution to victims of fraudulent credit card practices in 2014. 

• In May 2022, the CFPB ordered Bank of America to pay a $10 million civil penalty for illegal garnishments. 

• In 2022, CFPB and OCC fined Bank of America $225 million and ordered it to pay hundreds of millions of dollars in consumer redress for botched disbursement of state unemployment benefits during the COVID-19 pandemic.

Ways to Address the Issue - CFPB to Bank of America

The Consumer Financial Protection Act empowers the CFPB to take action against institutions that violate consumer financial protection rules. The practices of Bank of America breached the Act's restriction on unfair and misleading actions or practices.

According to the CFPB's guidelines, Bank of America must:

Stop Recurring Offenses: According to the instructions, Bank of America must cease creating unauthorized accounts, explain major limits on any rewards card benefits, and offer bonuses as stated. 

Pay Restitution to Aggrieved Customers: The orders require Bank of America to reimburse customers who have been charged illegal non-sufficient funds fees and have not previously been made whole by the bank, totaling about $80.4 million in consumer redress. The bank must additionally reimburse clients who suffered fees as a result of the unauthorized establishment of new credit card accounts, as well as any customers who were wrongfully refused bonuses and who have not previously been compensated. 

Pay $90 million to CFPB: Bank of America will pay a $60 million penalty to the CFPB for charging repetitive non-sufficient funds fees, as well as a $30 million penalty for its credit card rewards practices and creating unauthorized accounts. The fines will be placed into the Consumer Financial Protection Bureau's victims' compensation fund. Bank of America will also pay the OCC a $60 million penalty for its double-dipping fee practices.