Bank of America ordered to pay over $100 million for illegal banking practices

CHARLOTTE, N.C. (CN) — Consumer protection agencies slapped the country’s second-largest bank with over $100 million in penalties Tuesday for illegal practices including double-charging for transaction fees and opening accounts without customers’ permission.

“Bank of America wrongfully withheld credit card rewards, double-dipped on fees and opened accounts without consent,” Consumer Financial Protection Bureau Director Rohit Chopra said in a prepared statement. “These practices are illegal and undermine customer trust.”

The Charlotte, North Carolina-based bank must pay $90 million to the CFPB and another $60 million to the Office of the Comptroller of the Currency. The CFPB accuses the bank of systematically double-dipping on fees imposed on customers with insufficient funds in their account, withholding reward bonuses explicitly promised to credit card customers and misappropriating sensitive personal information to open accounts without customer knowledge or authorization.

The bank’s practice of charging customers tens of millions of dollars in fees on resubmitted transactions is illegal, according to the OCC, under Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices.

A CFPB investigation found that Bank of America double-dipped by allowing insufficient fund fees of $35 to be repeatedly charged for the same transaction. Customers could not know when or if a merchant would resubmit a transaction to the bank for payment, and therefore could not reasonably avoid the assessment of multiple fees for the same transaction, according to the OCC.

“Overdraft programs should help, not harm, consumers,” said Acting Comptroller of the Currency Michael J. Hsu. “We expect banks to conduct their activities in compliance with all applicable laws and standards, and when they don’t, we will act accordingly.”

Bank of America has waived, refunded or agreed to refund tens of millions of dollars to customers harmed by its practice of charging such fees. The bank, which serves 68 million people and small business clients with branches and ATMs in 38 states and the District of Columbia, has already paid the $60 million OCC penalty to the U.S. Department of the Treasury.

To compete with other banks, Bank of America offered cash and points when signing up for a credit card. The CFPB claims the bank illegally withheld promised credit card account bonuses, such as cash rewards or bonus points, to tens of thousands of consumers from 2018 to 2022.

The CFPB also claims that to reach sale incentive goals, Bank of America employees illegally applied for and enrolled consumers in credit card accounts without consumers’ knowledge. Without their permission, they used consumers’ credit reports to complete applications.

In addition to the $90 million penalty, the CFPB also ordered Bank of America to compensate consumers charged unlawful non-sufficient funds fees who have yet to be made whole by the bank, totaling $80.4 million in consumer redress. The bank must also compensate consumers who incurred costs from the unauthorized opening of new credit card accounts and any customers improperly denied bonuses. The CFPB will deposit the penalties into the CFPB’s victims’ relief fund.

Tuesday’s orders are far from the first time Bank of America has been penalized for illegal banking practices. Bank of America has paid nearly $1 billion in penalties since 2014 from issues ranging from unlawful credit card practices to botched disbursement of state unemployment benefits at the height of the COVID-19 pandemic.