July 11 (Reuters) – Bank of America ( BAC.N ) agreed on Tuesday to pay $250 million in fines and compensation to settle claims the bank systematically double-charged customer fees, withheld promised credit card benefits and opened accounts without customer authorization.
Bank of America agreed to pay $100 million in restitution to injured consumers and an additional $150 million in civil penalties after the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) said the bank violated a number of laws that began in 2012.
Bank of America reaped hundreds of millions of dollars by charging multiple fees to customers who didn’t have enough funds in their accounts from February 2018 to February 2022, the CFPB said in a statement. Consumers could not reasonably expect or understand that they would be hit with $35 fees every time the bank refused to pay a single transaction, regulators said.
In a statement, Bank of America said it voluntarily eliminated or reduced a number of fees last year.
The CFPB has launched a crackdown on a number of so-called “junk fees,” including overdraft and insufficient fund fees, it says lenders unfairly charge customers for banking services.
“These practices are illegal and undermine customer trust. The CFPB will put an end to these practices throughout the banking system,” CFPB Director Rohit Chopra said in a statement.
Under sales pressure or in search of rewards, Bank of America employees illegally applied for and enrolled consumers, without their knowledge, in credit card accounts starting at least 2012, the CFPB said. The accounts represented a “small percentage” of new accounts at the bank, regulators said.
The bank, based in Charlotte, North Carolina, also failed to cash in on cash rewards and bonus points promised to tens of thousands of credit card customers, according to the CFPB.
In addition to paying $90 million in fines to the CFPB and $60 million to the OCC, the bank agreed to update regulators on its compliance progress in a year.
“We voluntarily reduced overdraft fees and eliminated all non-sufficient funds fees in the first half of 2022. As a result of these industry-leading changes, revenue from these fees has fallen more than 90 percent,” Bank of America said in a statement.
Democratic Senator Sherrod Brown described the case as an example of American banks filling their profits with Americans’ money.
“This is just the latest in a long line of illustrations of why we can’t trust Wall Street to do the right thing,” he said.
Separately, Bank of America’s financial advisory arm Merrill Lynch, Pierce, Fenner & Smith agreed to pay $12 million in fines to the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority for failing to file hundreds of suspicious activity reports to regulators from January 2009 to November 2019.
Merrill discovered the problem in 2019, according to the SEC’s order.
“Following an internal review, we reported this matter to regulators and have improved our process and training regarding these registrations,” the bank said in a statement on the matter.
Bank of America shares rose 1.1% by 2:02 PM ET (1802 GMT), recovering losses from early trading.
Reporting by Rami Ayyub and Chris Prentice Additional reporting by Saeed Azhar, Jonathan Stempel; editing by Emma Rumney, Michelle Price, Sharon Singleton and Emelia Sithole-Matarise
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