CFPB Fines BofA $10M for Improper Garnishments

The Consumer Financial Protection Bureau yesterday announced an enforcement action against Bank of America, in which the nation’s second-largest financial institution will pay a fine of $10 million after it was accused of unlawfully garnishing $592,000 from its customers’ bank accounts.

A copy of the settlement order can be accessed by clicking here.

BofA was accused of unlawfully freezing customers’ bank accounts, charging garnishment fees, and garnishing funds that were sent to creditors because the garnishment orders were not issued or processed in the states in which the consumers lived. The bank also broke the law by inserting language into contracts that limited its customers’ rights to challenge garnishments.

Interestingly enough, the announcement regarding the enforcement action against Bank of America came in the same week that the Sixth Circuit Court of Appeals issued a ruling, affirming a collection law firm violated the Fair Debt Collection Practices Act by obtaining a garnishment in the wrong jurisdiction.

The issue, as it relates to BofA, was a failure to understand which laws applied when it received a garnishment order — the state law in which the garnishment was issued, or the state law in which the consumer lived, if it was in a different state. Bank of America “misrepresented” that their customers’ rights were governed by the laws of the issuing states, when the laws of the customers’ states applied. The bank also included language in contracts signed by its customers that prohibited them from pursuing legal claims in the event a garnishment was mishandled. Consumers have the right to challenge garnishments, regardless of what it says in a contract, the CFPB said.

Along with refunding the $592,000 and paying the $10 million fine, the bank is required to reform its garnishment process and remove the unenforceable language from its contracts.

“We have enhanced our processes to ensure compliance with all applicable state laws as we execute court orders,” a spokesman for BofA said in a published report. “As part of this agreement, we will refund associated fees to customers involved in approximately 3,700 cases.”

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