According to a deal that would see Regions Bank pay $141 million in client refunds and an extra $50 million in costs, the bank was found to have twice in the last ten years levied unlawful overdraft fees.
After conducting an investigation, the Consumer Financial Protection Bureau discovered that Regions was still assessing overdraft fees on some ATM withdrawals and some debit card purchases made between 2018 and 2021, even though the Alabama-based bank had assured its clients that they had sufficient funds in their accounts to cover the transactions.
The CFPB also discovered that management at Regions knew the system issue was happening but delayed changing their procedures until the bank could find a means to make up the lost fees-related income.
According to the organization, bounced check fees, also known as overdraft and non-sufficient funds penalties, made for around 18% of the bank’s non-interest revenue in 2019.
The agency’s head, Rohit Chopra, said in a statement that “Regions Bank raked in tens of millions of dollars in unexpected overdraft fees every year, even though its own personnel warned that the bank’s actions were unlawful.”
“We have more work to do to alter this attitude, too frequently, huge financial organizations calculate that continuing to flout the law is more lucrative than respecting it.”
While disagreeing with the bureau’s evaluation of its business operations, Regions stated in a statement that it was happy to put the settlement behind them.
Regions ceased collecting this specific overdraft charge more than a year ago, according to a statement from Tara Plimpton, chief legal officer. We made this measure as a part of a larger set of improvements, which also included modernizing the bank’s posting order and transaction processing to provide consumers a better picture of the money they had available to spend freely.
Generating income
Regions has received fines in the past for its use of overdraft fees. The bureau issued a $7.5 million fine and a $49 million repayment order to Regions in 2015 for charging overdraft fees.
Customers of those regions who chose not to use the program were nonetheless charged for overdrafts.
The Consumer Financial Protection Bureau (CFPB), established in the aftermath of the 2008 financial crisis to safeguard customers from financial exploitation, has a negative outlook on onerous overdraft fees under President Biden.
Consumers spend at least $29 billion yearly in what the government characterizes as unreasonable costs, it said earlier this year.
According to Bankrate, the average overdraft cost during the epidemic was $33.58. According to the Center for Responsible Lending, large US banks have recently made around $9 billion in income through overdraft, ATM, and other fees per year.