Bank of America Fined $250 Million for Illegal Practices

What's the story?

• Bank of America was ordered to pay over $250 million to customers and in penalty fees for illegal practices, including double charging for insufficient funds, withholding reward bonuses, and illegally opening consumer accounts.

The investigation 

• The Consumer Financial Protection Bureau's (CFPB) investigation found that the Bank of America took advantage of hundreds of thousands of customers across multiple product lines over several years. The Office of the Comptroller of the Currency also ordered the bank to pay $60 million for breaking overdraft fee laws.
• According to the CFPB, the bank implemented a "double-dipping scheme" to "harvest junk fees" from customers. It did so by repeatedly charging people $35 for the same transaction when they overdrew from their accounts.
• The CFPB said the bank's actions "are illegal and undermine customer trust." The bureau's director, Rohit Chopra, declared:

"Building a business model by double dipping on fees is simply not legal, and that's why we've sanctioned Bank of America and ordered them to pay back customers they cheated."

• The investigation found that the bank targeted specific customers with special cash and point rewards for signing up for a credit card. However, these bonuses were withheld from tens of thousands of victims. 
• Additionally, starting as far back as 2012, employees at the Bank of America enrolled customers for credit cards without their knowledge or permission, a move to reach sales-based incentive goals. Illegally signing people up resulted in unjust fees and negative impacts on their credit scores. Chopra said:

"That's essentially taking over someone's identity and exploiting it financially, and it's totally improper. It's totally inexcusable."

Bank of America's track record

• This is not the bank's first offense — it received a $727 million penalty from CFPB in 2014 for deceptive marketing, a $20 million fine for charging customers for services they never received, and two penalties in 2022 amounting to $235 million. 
• Mike Litt, U.S. Public Interest Research Group Consumer Campaign director, said in a statement: 

"Bank of America is a repeat offender. Being a household name that has been punished before didn't stop it from allegedly cheating customers out of tens of millions of dollars in fees and credit card rewards and opening up accounts without their authorization."

• In response, the bank's Senior Vice President of Media Relations, Naomi R. Patton, said that the bank voluntarily reduced overdraft fees, eliminated "non-sufficient fund fees," and dropped the overdraft fee from $35 to $10 in 2022. She said the changes resulted in a drop in revenue of over 90%.

Do you trust your bank?

-Jamie Epstein

(Photo credit: Flickr/Mike Mozart)