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Failure to Follow the Rules can be Costly, as Bank of America has Discovered
Thursday, April 10, 2014 6:50 AM

The Office of the Comptroller of the Currency (OCC) has assessed a $25 million penalty against Bank of America, N.A., Charlotte, North Carolina, and its credit card subsidiary FIA Card Services, N.A., Wilmington, Delaware, (collectively, the bank), and ordered restitution totaling approximately $459.5 million to 1.9 million consumer accounts.

The OCC found that the bank’s billing practices violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1), which prohibits unfair and deceptive acts or practices.  The $25 million civil money penalty reflects a number of factors, including the scope and duration of the violation and financial harm to consumers from the unfair practices.  The penalty will be paid to the U.S. Treasury.

Consumers eligible for restitution include those who were unfairly billed for identity theft protection products marketed and sold by the bank and its vendors.  The restitution ordered by the OCC will benefit consumers who enrolled in and paid for identity theft protection products between October 2000 and September 2011 but did not receive the full benefit of the products.  The restitution will include the full amount paid for these products, plus any associated over-limit fees and finance charges.

The OCC order also requires the bank to improve governance of third-party vendors associated with “add-on” consumer products and submit a risk management program for “add-on” consumer products marketed or sold by the bank or its vendors.

Steve Gibbs, Assistant Vice President, Shared Compliance Resources, says this is a good reminder of what can happen when financial institutions don’t follow the rules.

“Whether it’s financial, reputational or more punitive in a regulatory sense, there is a definite cost to failing to comply with policies, procedures, codes, rules, laws, and statutes,” notes Gibbs.

Gibbs acknowledges that it can be challenging to stay on top of the onslaught of new compliance rules and regulations; however, he says credit unions have little choice but to embrace a “compliance culture.”

“It’s clearly far easier and more efficient to comply than not,” he adds.

Gibbs reminds credit unions that compliance specialists are available to them through Shared Compliance Resources. Throughout the year, these experienced compliance professionals divide or share their time amongst assigned credit unions. They can assist credit unions in a number of areas, including the development, management and maintenance of an effective compliance program, as well as providing a risk assessment of the existing compliance system; monitoring and analyzing new and revised laws and regulations, and training staff and management on current and crucial regulatory issues.