- Bank of America agrees to a settlement of $250 million over allegations of systematically double-charging customers, denying promised credit card benefits, and unauthorized account opening.
- The bank is expected to pay $100 million in consumer restitution and an additional $150 million in civil penalties after violations beginning in 2012, identified by the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC).
In a significant move reflecting broader regulatory action against questionable banking practices, Bank of America (BAC.N) acceded on Tuesday to pay a staggering $250 million in fines and restitution. This development arises from accusations that the bank engaged in the systematic imposition of excessive fees, denied customers their due credit card privileges, and unscrupulously initiated accounts without client approval.
The settlement, which will see $100 million directed towards aggrieved customers and an additional $150 million assigned to civil penalties, comes as the CFPB and OCC implicated the bank in multiple legal breaches commencing in 2012.
Crackdown on ‘Junk Fees’
According to a CFPB statement, from February 2018 until February 2022, the banking behemoth capitalized on an intricate fee structure, accumulating hundreds of millions of dollars by levying multiple charges on customers who had insufficient account funds. The imposition of these unexpected $35 fees each time the bank refused a single transaction has been deemed unreasonable and unacceptable by regulators.
Bank of America commented that it had voluntarily curtailed or lessened an array of fees during the last year. Nevertheless, the CFPB remains committed to its stringent clampdown on an assortment of “junk fees,” inclusive of overdraft and non-sufficient fund fees, which it claims banks unfairly enforce for banking services.
“The CFPB will be putting an end to these practices across the banking system,”
announced Rohit Chopra, the CFPB director, further solidifying the Bureau’s stance against such dubious banking practices.
Furthermore, the CFPB ascertained that under the burden of sales pressure or in the pursuit of rewards, Bank of America employees unethically enrolled consumers into credit card accounts, without their knowledge, starting from 2012. The bank also reportedly defaulted on delivering cash rewards and bonus points pledged to numerous credit card customers.
Following this, Bank of America concurred to an additional obligation, agreeing to apprise regulators of its compliance progress after a year. The bank further stated that
“revenue from these fees has dropped more than 90 percent”
“voluntarily reduced overdraft fees and eliminated all non-sufficient fund fees in the first half of 2022.”
Separately, Bank of America’s advisory division, Merrill Lynch, Pierce, Fenner & Smith, has consented to pay a $12 million fine to the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority. This is due to its failure to submit several suspicious activity reports to regulators from January 2009 to November 2019, an issue the bank reportedly discovered internally in 2019.
At 2:02 p.m. ET (1802 GMT), Bank of America shares were seen to rally, surging 1.1%, a recovery from losses observed in early trading.