CFPB Orders National Bank to Pay $10 Million Over Overdraft Practices

CFPB Overdraft EFTA Vendor Management

On July 14, the CFPB ordered a Delaware-based national bank to pay a $10 million civil penalty to settle allegations that its overdraft fee practices were deceptive and violated Regulation E of the Electronic Fund Transfer Act because the bank allegedly charged consumers overdraft fees in connection with ATM and one-time debit card transactions without obtaining their affirmative consent. The CFPB alleges that the bank incentivized sales representatives of a third-party telemarketing vendor to market its overdraft service through “Opt-in Call Campaigns.” According to the consent order, vendor representatives deviated from sales scripts approved by the bank and provided consumers with incomplete, inaccurate, or misleading information to persuade them to enroll in the overdraft service. The CFPB alleges that the bank failed to properly monitor the vendor and detect “widespread problems” throughout the Opt-in Call Campaigns, including, but not limited to: (i) enrolling consumers in the bank’s overdraft program without their consent; (ii) falsely advertising the overdraft program as free, when in fact consumers were charged $35 per overdraft; (iii) misleading consumers into believing they would be charged overdraft fees regardless of whether or not they signed up for the program, or telling consumers they would face additional charges if they opted out of the program; and (iv) falsely claiming that the purpose of the call was “not a sales call” but rather to let consumers know that the bank had changed its name. In addition to imposing a $10 million civil penalty, the consent order requires the bank to, among other things, (i) validate that all consumers who were enrolled in the program through its vendor wish to remain in the program; (ii) stop using a vendor to conduct the marketing of its overdraft service; and (iii) develop and implement a new or revised written policy to govern vendor management for Service Providers engaged in telemarketing of consumer financial products or services.