Bank of America has been ordered to pay $250 million in fines and customer compensation for deceptive practices that harmed “hundreds of thousands of consumers,” according to the Consumer Financial Protection Bureau.
The federal regulator on Tuesday said the bank withheld credit card rewards, illegally double-dipped on fees and opened accounts without consent. It’s one of the highest financial penalties in years against the country’s second-largest bank, which was also ordered to pay a $10 million civil penalty over unlawful garnishments and $225 million in fines for “botched” state unemployment benefit disbursements in 2022.
The latest penalty includes $90 million to the CFPB and $60 million to the Office of the Comptroller of the Currency. The bank must also pay $80.4 million in consumer redress on top of the $23 million it had already paid to customers denied rewards bonuses.
‘Double-dipping’ to harvest junk fees
Part of the penalties stem from a now-defunct Bank of America policy that charged customers $35 when the bank declined a transaction because a customer did not have enough funds in their account, also called a non-sufficient funds fee. The CFPB found the bank allowed fees to be repeatedly charged for the same transaction, allowing the bank to generate “substantial additional revenue.”
Bank of America eliminated all non-sufficient fund fees and reduced overdraft fees from $35 to $10 in the first half of 2022. As a result, “revenue from these fees has dropped more than 90 percent,” the bank said in a statement to USA TODAY.
Fake accounts
CFPB said Bank of America withheld credit card rewards to tens of thousands of consumers who submitted applications in person or over the phone instead of online.
The regulator said the bank also had employees that, since at least 2012, illegally applied for and enrolled consumers in credit card accounts without their knowledge to reach now disbanded sales-based incentive goals. This resulted in unjustified fees and harms to consumers’ credit profiles, CFPB found.
The order comes less than a year after the CFPB’s largest fine against any bank to date in late 2022, when the agency ordered Wells Fargo to pay $2 billion to customers and a $1.7 billion penalty to settle charges after a series of scandals tied to its sales practices.
The CFPB in 2014 also ordered Bank of America to pay $727 million in redress for illegal credit card practices.
