WASHINGTON Regions Financial will pay a $7.5 million fine after the Consumer Financial Protection Bureau said it charged consumers illegal overdraft fees on checking and payday-loan-like accounts.
The CFPB's order, released Tuesday, claims the $122 billion-asset Regions charged overdraft fees to consumers who did not opt in for overdraft coverage. The Birmingham, Ala., bank also allegedly charged fees on accounts that had insufficient funds tied to deposit-advance products even though the bank claimed it would not do so. Regions has already refunded $49 million back to affected consumers but the consent order requires the bank to finish the refund and pay a $7.5 million fine, without admitting or denying wrongdoing.
"Today the CFPB is taking its first enforcement action under the rules that protect consumers against illegal overdraft fees by their banks," CFPB Director Richard Cordray said in a press release. "Regions Bank failed to ask consumers if they wanted overdraft service before charging them fees. In the end, hundreds of thousands of consumers paid at least $49 million in illegal charges. We take the issue of overdraft fees very seriously and will be vigilant about making sure that consumers receive the protections they deserve."
The CFPB said Regions did not give customers an opportunity to opt in to overdraft services when they linked a checking account to a savings account or line of credit but then charged up to $36 in overdraft fees. The company identified the issue 13 months later but failed to stop the charges until almost a year after that, the CFPB said.
"It was not until April 2012 that the compliance department brought the violation to the attention of senior executives, who then reported the error to the bureau," the CFPB said. "Regions reprogramed its systems to stop charging the unauthorized fees in June 2012. In early 2015, the bank discovered additional accounts that had been charged unauthorized fees."
The CFPB also said Regions "misrepresented" a deposit-advance product called Regions Ready Advance by charging overdraft and nonsufficient funds fees to the account after saying it would not make such charges.
"Specifically, if the bank collected payment from the consumer's checking account and the payment was higher than the amount available in the account, it would cause the consumer's balance to drop below zero," the CFPB said. "When that happened, the bank would either cover the transaction and charge an overdraft fee or reject its own transaction and charge a nonsufficient funds fee."
This activity resulted in Regions charging about $1.9 million to more than 36,000 customers from November 2011 to August 2013, the agency said.
A company spokesperson confirmed that Regions ended the Ready Advance program last year and a majority of the matters raised in the order have already been addressed.
"After discovering that a small subset of customers had been charged fees in error, we reported it to the CFPB and began refunding the fees," said the company in an emailed statement. "We believe the vast majority of the refunds have been completed and we have made changes to our internal systems to resolve these matters."
Regions has agreed to finish its refunds to consumers, fix any negative credit reporting that occurred from the activities and pay a $7.5 million penalty.