CFPB Fines Santander $10 Million for Illegal Overdraft Fees

Santander Bank will pay a $10 million fine for allegedly charging illegal overdraft fees and signing up consumers for overdraft services without their consent, the Consumer Financial Protection Bureau said Thursday.

The CFPB's order said that the Wilmington, Del., bank deceptively marketed its overdraft service from 2010 to 2014, using a telemarketer to persuade consumers to "opt in" for the service.

The CFPB said the practice violated federal rules that prohibit banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers affirmatively opt in.

"Santander tricked consumers into signing up for an overdraft service they didn't want and charged them fees," CFPB Director Richard Cordray said in a press release. "Santander's telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service. We will put a stop to any such unlawful practices that harm consumers."

The bureau ordered Santander to go back and directly call consumers to provide affirmative consent to its overdraft service. The bank cannot use a vendor to telemarket its overdraft service and must provide additional oversight of vendors.

Santander acknowledged that it did not sufficiently supervise its vendor. The $92.3 billion-asset bank declined to name the vendor because the CFPB did not do so, said Ann Davis, a Santander spokeswoman.

"We regret that the vendor we hired to promote this service may not have followed our instructions and we did not supervise them as closely as we should have," the bank said in a statement. "These actions, which occurred several years ago, do not reflect our values and fell short of the high expectations we have for ourselves and our vendors. We are terminating our relationship with the vendor and are continuing to implement additional controls to ensure more effective oversight of our vendors and our processes."

The consent order found that in many instances, the bank's customer service representatives did not ask consumers if they wanted to opt in for overdraft service. Instead, phone agents gave consumers a brief description of the overdraft service and then had them verify the last four digits of their social security numbers, which amounted to confirmation of their enrollment.

In some instances, the phone agents deceived consumers by saying that the service was free and falsely told consumers that their pitch was "not a sales call."

Santander initially charged consumers a $35 overdraft fee and a $5 fee per day that the account was overdrawn but only if the account remained unpaid for more than five business days.

Later the bank changed the per-day fee to a one-time $35 fee on the sixth business day that an account was still overdrawn.

Santander's $10 million fine was higher than the $7.5 million fine the CFPB levied last year against Regions Financial for allegedly charging illegal overdraft fees.