Regions Bank unlawfully charged overdraft fees to consumers who had not opted-in for overdraft coverage, the U.S. Consumer Financial Protection Bureau said Tuesday, adding that the bank is continuing to refund a total of about $49 million in fees to hundreds of thousands of consumers.
Additionally, the Bureau said it has fined Regions $7.5 million “for its illegal actions.”
The Bureau also alleges that Regions charged overdraft and non-sufficient funds fees on its deposit advance product, despite claiming it would not. Under a consent order with the CFPB, Regions must fully refund all remaining consumers.
In 2010, federal rules took effect that prohibits banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions — unless consumers affirmatively opted in. If consumers don’t opt-in, banks may decline the transaction, but cannot charge a fee. The “opt-in” rule took effect in July 2010 for new accounts and August 2010 for existing accounts.
“Today the CFPB is taking its first enforcement action under the rules that protect consumers against illegal overdraft fees by their banks,” said CFPB Director Richard Cordray. “Regions Bank failed to ask consumers if they wanted overdraft service before charging them fees.
In the end, hundreds of thousands of consumers paid at least $49 million in illegal charges, he added.
No ‘Opt-In’ Opportunity
As is common among big banks, Regions allowed consumers to link their checking accounts to savings accounts or lines of credit. Funds from the linked account would automatically be transferred to cover a shortage in a consumer’s checking account. But Regions never provided customers with linked accounts an opportunity to opt in for overdraft, as is required by the federal rules.
Because those consumers had not opted in, Regions should have simply declined ATM or one-time debit card transactions that exceeded the available balance in both the checking and linked accounts. Instead, the bank paid those transactions then charged its customers a fee of up to $36. Those fees violated the opt-in rule.
Regions Bank, headquartered in Birmingham, Alabama, operates approximately 1,700 retail branches and 2,000 ATMs across 16 states.
Click here to see the consent order.