Bank of America Ordered to Pay $250 Million Over Wrongful Fees

Federal regulators hit Bank of America with a $250 million penalty for opening credit-card accounts in customers’ names without their consent and double-charging fees.

The Consumer Financial Protection Bureau said the bank opened credit-card accounts without permission from customers using credit reports it obtained illegally.

Bank of America employees also improperly withheld credit-card rewards and charged overdraft fees several times for the same transactions, the CFPB and another regulator, the Office of the Comptroller of the Currency, said.

The penalty includes $100 million for harmed customers, $90 million for the CFPB and $60 million for the OCC.

“These practices are illegal and undermine customer trust,” CFPB Director Rohit Chopra said. “The CFPB will be putting an end to these practices across the banking system.”

The CFPB is trying to root out what its leadership calls “junk fees” that banks charge to their customers. Chopra, who was appointed to run the CFPB by President Biden, has publicly pushed banks to scale back overdraft fees and other charges. Industry groups have said his agenda ignores the work that banks were already doing to help struggling customers.

Bank of America previously had a policy of charging customers $35 after the bank declined a transaction because the customer didn’t have enough funds in their account. For years, though, the bank “double-dipped” by charging the fee again if the merchant tried another time to charge the transaction, the CFPB said.

Between 2018 and 2022, the bank earned hundreds of millions of dollars from these fees, the CFPB said. The CFPB said the bank must return some $80 million that it hasn’t yet refunded to customers.

Last year, Bank of America reduced its overdraft fees to $10 and eliminated all non-sufficient fund fees, a bank spokesman said. “As a result of these industry leading changes, revenue from these fees has dropped more than 90%,” he said in a statement.

The CFPB’s enforcement actions have focused more on these fees. As part of a $3.7 billion settlement with Wells Fargo in December, the agency said the bank illegally charged overdraft fees when customers had money to cover the transaction at the time it happened.

The CFPB also said Bank of America promised signup bonuses on its website to customers who opened accounts, but withheld the bonuses if they applied in person or over the phone, without disclosing that the bonus was restricted to online applications.

Bank of America employees also illegally applied for and enrolled consumers in credit-card accounts without consumers’ knowledge or authorization since at least 2012 to reach incentive goals, according to the CFPB.

The agency acknowledged in its order that the unauthorized accounts represented a sliver of Bank of America’s new accounts, and that, as of the beginning of this year, it eliminated sales goals for branch employees focused on selling credit-card accounts.

Still, the issue of unauthorized accounts has been a focal point since Wells Fargo employees were found to have created perhaps millions of fake accounts to meet sales goals. Other banks, including U.S. Bancorp and Fifth Third Bancorp, have also paid fines tied to these accounts.

Bank of America, which paid tens of billions of dollars in fines after the 2008-09 financial crisis, has largely stayed out of trouble since. The OCC and CFPB fined it $225 million last year over its mishandling of pandemic unemployment benefits.

Write to Ben Eisen at [email protected] and Will Feuer at [email protected]