Consumer Finance Insights
July 22, 2016

CFPB Orders National Bank to Pay $10 Million for Overdraft Practices

On July 14, 2016, the CFPB announced that it ordered a bank to pay $10 million in fines for its overdraft service practices.  According to the CFPB, the bank’s telemarketing vendor used allegedly deceptive marketing and sales pitches to mislead consumers to sign up for its overdraft service without the consumers’ consent.

The overdraft service charged customers $35 per overdraft, which is against federal law unless consumers affirmatively opt in to the service.  From 2010 to 2014, the bank used telemarketers to persuade consumers to opt into this service.  The telemarketers were purportedly rewarded for their efforts through increased pay based on reaching sales targets.  According to the CFPB, the bank’s alleged conduct of deceptively marketing its overdraft protection services and charging customers without their consent violated the federal Opt-In rule, the Electronic Fund Transfer Act (“EFTA”) and the Consumer Financial Protection Act (“CFPA”).

In addition to a $10 million penalty, the CFPB’s order requires that the bank verify that all consumers enrolled for its overdraft protection through its telemarketers in fact consented to the enrollment.  It also prohibits the bank from using its telemarketing vendor to market overdraft services, prohibits the bank from requiring a target number of opt-ins and offering financial incentives to its telemarketers, and requires an increase in oversight of vendors engaged in telemarketing for other consumer financial products or services.

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