CFPB investigating Regions’ overdraft practices

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Regions Financial is the latest bank to face regulatory scrutiny over fees charged to consumers who overdraw their accounts.

The $145 billion-asset company disclosed Thursday that it was in the process of responding to a civil investigative demand from the Consumer Financial Protection Bureau over certain overdraft practices and policies. The disclosure, which did not include any additional details, came in a quarterly filing with the Securities and Exchange Commission.

A company spokesman said Friday that Regions is cooperating with the CFPB’s inquiry. “We take any inquiry very seriously, and we believe we have structured our overdraft services in a way that meets the needs of customers while complying with rules governing these services,” the spokesman, Jeremy King, said in an email.

After the disclosure, analysts at Janney Montgomery Scott downgraded their rating on Regions from “buy” to “neutral,” citing not only the CFPB inquiry but other factors including a recent recovery in the company’s stock price. Shares in Birmingham, Ala.-based Regions were down 1.75% in morning trading on Friday.

Regions is only the latest bank to attract regulators’ attention over overdraft practices. In August, TD Bank agreed to pay $122 million in fines and restitution in a settlement with the CFPB, which alleged that the bank deceptively charged overdraft fees for certain ATM and one-time debit card transactions.

In 2018, TCF Financial agreed to pay $30 million in fines and restitution to settle a CFPB lawsuit that alleged the company engaged in deceptive and abusive overdraft practices.

If Joe Biden gets elected president and appoints a new CFPB director, the scrutiny of overdraft fees by the agency’s enforcement arm could be accompanied by new rules governing how the charges can be imposed.

Jaret Seiberg, an analyst at Cowen Washington Research Group, stated last month that he would expect a prospective new CFPB director to impose a ban on charging more than one overdraft fee per day, as well as a requirement that banks process transactions in a way that minimizes the charges.

When Regions pays an overdraft, it charges customers a $36 fee. The bank’s website states that it authorizes and pays overdrafts for transactions made with checks and for automatic bill payments. It also states that customers may opt to have overdrafts paid on transactions made with debit cards or at ATMs, and that if customers do not choose to authorize those transactions, they will be declined.

In 2019, Regions collected $373 million in fees from customers who either overdrew their accounts or were charged for failing to have sufficient funds to complete a transaction, according to an analysis of regulatory data by the Center for Responsible Lending.

That one-year total was more than the amounts generated by certain larger regional banks, including Truist Financial, Capital One Financial, Fifth Third Bancorp, KeyCorp and Citizens Financial Group. Regions’ income from such charges accounted for 17.7% of its total fee income, which compared with an average of 5.9% at the 20 U.S. banks that collected the most overdraft fee revenue in 2019, according to the analysis.

Regions is currently facing pressure to cut expenses amid revenue challenges. The company’s branch count will decline by about 54 in 2020 and by approximately 60 more next year, according to a Regions presentation at an investor conference Thursday.

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Law and regulation Overdrafts Regions Bank CFPB
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