CFPB slaps Bank of America with $150M fine for fake accounts, junk fees
Federal regulators are fining Bank of America $150 million for allegedly opening fake customer accounts, charging excessive fees and withholding credit card rewards.
Why it matters: The accusations cast a spotlight on the practices of one of the most powerful banks in the world.
What's happening: Bank of America will pay $90 million in penalties to the Consumer Financial Protection Bureau, $60 million in penalties to the Office of the Comptroller of the Currency and more than $100 million to compensate customers.
- The company was "systematically double-dipping on fees imposed on customers with insufficient funds in their account, withholding reward bonuses explicitly promised to credit card customers, and misappropriating sensitive personal information to open accounts without customer knowledge or authorization," the CFPB said in a statement.
In a statement, Bank of America insisted 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.”
- BofA had no immediate comment on the allegation that it opened fake accounts — something Wells Fargo was accused of doing during its scandal several years ago — but the CFPB said the bank had already taken steps to redress the matter.
What they're saying: “These practices are illegal and undermine customer trust," CFPB Director Rohit Chopra said in a statement. "The CFPB will be putting an end to these practices across the banking system.”
Details: The CFPB accused Bank of America of:
- Charging customers $35 "after the bank declined a transaction because the customer did not have enough funds in their account," piling up revenue as a result.
- Refusing credit card rewards to customers who applied over the phone or in person.
- Since at least 2012, "Bank of America employees illegally applied for and enrolled consumers in credit card accounts without consumers’ knowledge or authorization," the CFPB said.
- The bank's employees "illegally used or obtained consumers’ credit reports, without their permission, to complete applications" and then "consumers were charged unjustified fees, suffered negative effects to their credit profiles, and had to spend time correcting errors."
Zoom out: While the situation bears a resemblance to the Wells Fargo fake accounts scandal, the cases appear to be much different in scope.
- Wells agreed to a $3 billion settlement — substantially more than the Bank of America deal.
What's next: The CFPB ordered the banking giant to stop these practices and compensate consumers.
- The bank has already paid $23 million to consumers who were denied credit card rewards and will be required to pay another $80.4 million to customers who were unlawfully charged fees.
- It must also make payments to customers who had fake accounts opened in their name.