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A customer uses an ATM outside of a Bank of America branch in Rolling Hills Estates, California, on March 13, 2023. - US President Biden sought to reassure Americans over the country's banking system on Monday, while insisting emergency measures would not be paid for by taxpayers, as additional banks came under stress following the collapse of Silicon Valley Bank last week, the second largest bank failure in history, and New York regulators took control of Signature Bank on Sunday.
Federal regulators announced on Tuesday that they have determined that Bank of America harmed its customers by double-dipping on fees, withholding credit card rewards, and opening phony accounts, violating various customer financial protection laws.
The Consumer Financial Protection Bureau consequently ordered Bank of America (BAC) to pay more than $100 million to customers and $90 million in penalties. In addition, the Office of the Comptroller of the Currency fined Bank of America (BAC) $60 million.
Bank of America Fined Over Junk Fees, Fake Accounts
Serving 68 million individuals and small enterprises, this bank is the second largest in the United States. Some of the allegations resemble the Wells Fargo scandal of the previous decade, in which millions of bank accounts were opened without customer permission, as per CNN.
Bank of America, according to the CFPB, "harmed hundreds of thousands of customers over several years and across a variety of product lines and services."
The CFPB and OCC discovered, among other things, that the bank, which normally charged customers $35 if their transaction was declined due to insufficient funds, allowed those fees to be "repeatedly charged" for the same transaction, resulting in "tens of millions of dollars in fees on resubmitted transactions," according to the OCC.
This would occur if a third-party merchant resubmitted the charge to the customer's account, which may need more funds to cover the expense after the initial transaction was declined. The customer would then be charged either a $35 overdraft fee or a $35 insufficient funds fee.
The bank's disclosures could have made it obvious that a single transaction could incur multiple fees. In addition, customers needed help knowing when or if a merchant would resubmit a transaction to the bank for payment, making it impossible for them to avoid being charged multiple times for the same transaction, according to the OCC's statement.
Per USA Today, the second-largest bank in the United States was ordered to pay a $10 million civil penalty for unlawful garnishments and $225 million in fines for "mishandled" state unemployment benefit disbursements in 2022.
The most recent penalty comprises $90 million to the Consumer Financial Protection Bureau and $60 million to the Office of the Comptroller of the Currency. The bank must pay an additional $80.4 million in customer restitution on top of the $23 million already paid to customers denied rewards incentive eligibility.
The order comes less than a year after the CFPB issued its largest sanction against any bank to date in late 2022 when it ordered Wells Fargo to pay $2 billion to customers and a $1.7 billion penalty to resolve charges stemming from a series of scandals involving the bank's sales practices.
In 2014, the CFPB ordered Bank of America to pay $727 million for unlawful credit card practices.
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Who is Eligible for Bank of America's Refund?
According to the spokesperson, the bank no longer charges the fees in issue. Additionally, the CFPB ordered Bank of America to reimburse consumers who incurred costs from new credit card accounts opened without their consent and to compensate customers who were denied promised reward incentives.
The bank has already compensated consumers injured by withholding credit card bonuses of approximately $23 million. According to the CFPB, eligible customers do not need to take any action to receive their compensation.
Depending on the circumstances, Bank of America will deposit funds into client accounts or mail them a cheque. The bureau added that all customers affected by the missing credit card rewards will be compensated.
Bank of America verified to Newsweek that it will identify and contact eligible customers directly. Later this month, the bank will designate a point of contact for consumer inquiries.
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