National Bank Pays over $190 Million for CFPA, TILA and FCRA Violations

The CFPB recently entered into two separate consent orders with a national bank to resolve allegations that it violated the CFPA, TILA and FCRA.  The bank will pay over $190 million in civil money penalties and consumer redress, in addition to the $60 million in civil money penalties to the OCC for the same claims.

Following its investigations, the CFPB found that the bank had assessed re-presentment non-sufficient funds (NSF) fees for the same transactions, and, in some instances, as soon as the next day after the initial transaction was presented.  The CFPB claimed that this was an unfair practice in violation of the CFPA because consumers did not know whether merchants would re-present transactions or stop payments or revoke authorization in time to avoid re-presentment NSF fees.

The CFPB also found that the bank’s online advertisements of rewards cards and sign-up bonuses were false and deceptive because the bank did not clearly advertise that those promotions were only available to consumers who had applied online.  In other instances, some consumers who were specifically targeted for particular rewards cards and sign-up bonuses did not receive those promotions because the bank’s employees failed to accurately complete their applications.  The CFPB found these practices to be unfair, deceptive, or abusive in violation of the CFPA.  The CFPB also found that the bank’s individual sales goals and sales-based compensation scheme pressured employees to obtain consumer reports and use those reports to open accounts without consumers’ consent.  The CFPB found this practice to be a violation of TILA, which requires consumers’ consent before issuing credit cards, and FCRA, which requires consumers’ authorization before obtaining a consumer report.

The bank previously paid approximately $23 million in restitution to consumers in the form of adjustments to their rewards accounts, statement credits, or refund checks.  Under these consent orders, the bank will pay no less than $80,400,000 in restitution to consumers for all unreimbursed re-presentment NSF fees, and it will have to determine the redress amounts for consumers for whom unauthorized accounts were opened. The bank will also pay a total of $90 million in civil penalties to the CFPB, in addition to the $60 million in civil penalties the bank will pay to the OCC. Additionally, the bank’s board must submit a compliance progress report, which, amongst other things, describes the bank’s compliance with the redress reports and compliance plan. 

The bank neither admits nor denies the allegations.