The Consumer Financial Protection Bureau has issued an order saying Birmingham-based Regions Bank bank illegally imposed overdraft fees on hundreds of thousands of its customers. Since 2010, CFPB regulations have required that banks give checking customers the option to “opt in” to overdraft protection or instead have their card declined once their account had reached zero.
Instead, Regions Bank extracted overdraft fees from customers who had wanted their cards declined at the point of sale.
The result, according to CFPB, was a whopping $49 million in illegal fees taken from customer accounts in 16 states.
According to the release by CFPB Tuesday, “Regions Bank voluntarily reimbursed approximately 200,000 consumers a total of nearly $35 million in December 2012 for the illegal overdraft fees. After the Bureau alerted the bank to more affected consumers, Regions returned an additional $12.8 million in December 2013. In January 2015, the bank identified even more affected consumers and is now required to provide them with a full refund. Under the terms of the consent order filed today, Regions must hire an independent consultant to identify all remaining consumers who were charged the illegal fees. Regions will return these fees to consumers, if not already refunded. If the consumers have a current account with the bank, they will receive a credit to their account. For closed or inactive accounts, Regions will send a check to the affected consumers.”
Regions will required to issue refunds to customers affected by the policy, to pay another $7.5 million in fines to CFPB, and to make sure the negative activity is expunged from their credit histories.
As part of this enforcement action, CFPB has issued a warning to consumers about the risks of overdraft protection programs. The agency reports that customers who opt into these protections pay higher banking fees and incur more involuntary account closures.
