Hundreds of thousands of Bank of America customers who were charged insufficient fund fees multiple times for a single transaction are set to receive refunds, the federal government said on July 11.
The Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) have fined Bank of America $250 million for illegally charging junk fees, withholding credit card rewards and opening fake accounts.
Of that amount, Bank of America must pay a total of $80.40 million for its former practice of repeatedly charging customers a $35 fee for insufficient funds on the same transaction and after the initial charge. The practice resulted in Bank of America generating hundreds of millions of dollars from the fees, which substantially harmed consumers, the CFPB said.
The government found that from September 2018 to February 2022 customers were charged each time merchants re-submitted a transaction that the bank had already declined. The bank was not fined for any initial insufficient funds charges, however.
Current bank customers will be reimbursed by direct deposit to their accounts for the specific overdraft fees they were charged. Former bank customers will be sent paper checks, a bank spokesperson told Kiplinger. He did not specify a timeline for the reimbursement.
The refund will correspond to the amount charged. So, if a customer asked a call center representative to reduce the fee to, for example, $10, then the customer would be refunded that $10, the spokesperson said. In May 2022, the bank reduced its overdraft fees to $10, from $35.
In a statement, Bank of America said that it voluntarily reduced overdraft fees and eliminated all non-sufficient fund fees in the first half of 2022. “As a result of these industry-leading changes, revenue from these fees has dropped more than 90 percent,” it added.
Calling the practice “a double-dipping scheme to harvest junk fees,” the CFPB said that Bank of America harmed hundreds of thousands of consumers over several years and across multiple product lines and services.
Bank of America has previously paid about $23 million to customers for denial of promised rewards bonuses. Tens of thousands of these consumers signed up for credit cards on the expectation they would receive special offers of cash and points, but the bank failed to honor in-person or over-the-phone applications, the CFPB said. The bank also denied sign-up bonuses to consumers due to the failure of its business processes and systems, the agency added.
The bank is also charged with misusing sensitive customer information to open unauthorized “fake” accounts, starting from at least 2012. The CFPB said the bank ran a now-disbanded, sales goals and incentives program, and that employees illegally applied for and enrolled customers in credit card accounts without their knowledge or authorization. Those actions led to consumers being charged unjustified fees and may have resulted in a negative impact on their credit scores.
As part of the total fine, the bank must pay the CFPB a $60 million penalty for repeatedly charging insufficient fund fees and $30 million for credit card rewards bad practices and for opening unauthorized accounts. Bank of America is also to pay the OCC a $60 million penalty for double-dipping fee practices.
“These practices are illegal and undermine customer trust,” CFPB Director Rohit Chopra said in a statement. He added that the agency will put an end to such practices across the banking system.
