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Financial Services Law Insights and Observations

CFPB Issues Consent Order to National Bank Over Account Operations

CFPB UDAAP Overdraft Incentive Compensation

Consumer Finance

On September 8, the CFPB issued a consent order to a national bank to resolve allegations that its employees opened deposit and credit card accounts for consumers without obtaining consent to do so. According to the CFPB’s consent order, the respondent implemented an incentive compensation program under which employees “engaged in Improper Sales Practices to satisfy goals and earn financial rewards.” The CFPB alleges that the bank’s employees’ Improper Sales Practices were unfair and abusive. Specifically, the consent order alleges that the employees, possibly without consumers’ knowledge or without their consent, (i) opened more than 1.5 million deposit accounts and subsequently transferred money from consumers’ existing accounts to fund the newly opened accounts; (ii) submitted approximately 565,000 credit card account applications on behalf of consumers, with consumers consequently incurring late, annual, and over-draft fees on such accounts; (iii) issued debit cards and created personal identification numbers to activate the cards; and (iv) enrolled consumers in online-banking services. Pursuant to the consent order, the bank, among other things, must pay a civil penalty of $100 million and an expected $2.5 million in consumer redress.

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