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The Consumer Financial Protection Bureau (CFPB) has announced a $ 122 million settlement with TD Bank for illegal overdraft practices.
TD Bank will provide $ 97 million in refunds to about 1.42 million consumers, according to a release by the CFPB today. The activity included in the investigation took place between January 2014 and December 2018, and affected customers who opened new checking accounts and were not reimbursed or expected “covered overdraft fees” for ATM or one-time debit card transactions.
The bank will also pay a $ 25 million civil fine. The bank did not admit any crime.
The CFPB found that the bank’s Debit Card Advance (DCA) program was represented to customers as a free service as a feature that accompanies new checking accounts.
“In fact, TD Bank costs customers $ 35 for each transfer transaction paid through DCA and DCA is an optional service that does not come with a consumer checking account,” the CFPB release said.
In some cases, TD Bank representatives misrepresented the types of transactions that the program would cover, implying that DCA enrollment was automatic or failed to obtain customers’ permission to sign up for the program. At some offsite opening events held at colleges or companies, representatives did not always bring the DCA form to sign new clients, according to the Bureau’s permission order.
Read more: Understanding checking account protection and account by account
The bank’s registration practices for the bank’s registration have violated two pieces of regulation that protect consumers from fees for transfer tokens without their consent: the Electronic Act Transfer Act (EFTA) and Regulation E, stipulating the release of the CFPB. In addition, the Bureau found the bank in violation of the 2010 Consumer Financial Protection Act for misleading marketing tactics and in violation of the Fair Credit Reporting Act.
“Throughout the period, TD had a clear process to secure formal consent before providing this service to customers, making them an informed and conscious choice,” said Greg Braca, President and CEO of TD Bank, in a release from Thursday night.
Banks collect more than $ 12 billion a year in fees, according to research by the Center for Responsible Lending.
Bank will clarify the options for transfer protection and fee scheme
As part of the scheme, TD Bank has been instructed to correct its DCA subscription practices in order to make the consumer’s choice clearer when considering their subscription. The bank had begun updating its DCA disclosures and enrollment process from 2014, Braca noted in its statement.
It is currently unclear how soon affected customers will receive their share of the settlement. TD Bank has 60 days from August 19 to present a written plan for determining compensation amounts and managing distribution of fee payments to current and former customers.
The amount paid to the Bureau’s Civil Penal Fund may be used to compensate victims of other cases, or to facilitate the CFPB’s financial literature programs.
Read more: The CFPB: Protecting and educating financial consumers
TD Bank has approximately 1,250 locations in the US and is headquartered in Cherry Hill, New Jersey.
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