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CFPB Takes Action on Regions Bank under Overdraft Opt-In Rule
Thursday, April 30, 2015 6:30 AM

Although the Consumer Financial Protection Bureau is not expected to take up consumer protection policy issues associated with overdraft programs until later this year, the bureau has taken action against a large Alabama-based bank for violating federal rules prohibiting charging overdraft fees to consumers who have not opted in to overdraft protection programs.

Federal rules enacted in 2010 state a consumer must opt in to certain overdraft programs to be covered by their protections for one-time debit and ATM transactions and charged a fee for their services.

CFPB alleges that Regions Bank of Birmingham did not always limit overdraft fees to bank customers that had specifically opted in to its programs. Regions Bank is also accused of charging overdraft and non-sufficient funds fees on certain products despite its claims that it would not.

The CFPB announced Tuesday that the bank has been fined $7.5 million for illegal actions. The bureau noted that Regions already had refunded "hundreds of thousands of consumers" roughly $49 million in fees and that a consent order in the case requires the bank to fully refund all remaining consumers.

Regions Bank offers both overdraft protection services and products that consist of a loan to a consumer known as a deposit advance loan. The latter product allows the bank to claim repayment as soon as the next qualifying electronic deposit is received.

The CFPB found that Regions Bank:

  • Failed to obtain required opt-ins for certain consumers with linked savings and checking accounts. Regions never provided those consumers an opportunity to opt in for overdraft protections. Rather than declining ATM or one-time debit card transactions exceeding available account balances in the linked accounts, the bank charged customers a fee of up to $36;
  • Delayed fixing the violation until almost a year after discovering it in an internal review. The federal rules took effect in July and August 2010, but 13 months later a review found the violations. Not until April 2012 was the violation brought to the attention of senior executives, who reported the error to the CFPB. Additional unauthorized fees were also found to have been charged in early 2015; and
  • Charged non-sufficient funds fees and overdraft charges to more than 36,000 consumers, totaling approximately $1.9 million between November 2011 and August 2013, despite claiming it would not charge any such fees.

A CFPB consent order requires the bank to provide refunds to all remaining affected consumers, correct errors on credit reports and pay the associated fine.

The bureau also released a consumer advisory Tuesday on overdraft issues.

Regions Bank, according to the CFPB, operates roughly 1,700 retail branches and 2,000 ATMs across 16 states. With $119 billion in assets, it is one of the country's largest banks.