In a consent order that was announced yesterday with the Consumer Financial Protection Bureau, Regions Bank has agreed to pay $191 million in fines and restitution after it was accused of charging its customers “illegal surprise” overdraft fees on certain purchases.
A copy of the consent order can be accessed by clicking here.
Regions will pay a $50 million fine and refund $141 million of overdraft fees back to its customers, according to the terms of the consent order. This is the second time that the bank has been found to have been charging illegal overdraft fees. Regions paid $57 million in fines to the CFPB and restitution to its customers back in 2015 for charging overdraft fees to consumers who had not opted into overdraft protection programs.
This time, Regions was accused of charging overdraft fees on certain ATM withdrawals and debit card transactions where consumers believed they had sufficient funds at the time the transactions were made. Regions executives knew about the charges, but did not make changes because they wanted to wait until other programs were in place to make up the revenue that would be lost when it stopped charging the illegal fees, the CFPB alleged.
The process, known as authorized-positive fees, was “complex and counter-intuitive” and manipulated information so that consumers could not avoid the fees. Authorized-positive fees are transactions where the individual had sufficient funds at the time the transaction was authorized, but lacked those funds when the transaction was settled. The CFPB provided this example in its consent order:
For example, a consumer starts with $100 in their checking account. The consumer makes five $10 purchases with their debit card. The next day, a $120 check that the consumer wrote posts to their account, bringing the consumer’s account negative and incurring a $36 overdraft fee. On day three, the five debit-card purchases settle, and all five of them also incur overdraft fees for a total of $180 in fees — specifically Authorized-Positive Overdraft Fees — even though the consumer had sufficient funds when they made the debit-card purchases and did not know or control when the debit card purchases would settle.
Regions did not admit or deny any wrongdoing as part of the consent order.