Consumer Finance Insights
January 19, 2017

CFPB Files Suit Alleging Bank Deceived Consumers into Buying Overdraft Protection

On January 19, 2017, the CFPB announced it filed a suit against a Minnesota bank, alleging the bank deceived consumers into purchasing overdraft services.

The CFPB alleged that the bank, which operates throughout ​Minnesota, Wisconsin, Illinois, Michigan, Colorado, Arizona, and South Dakota, made it seem mandatory to purchase overdraft protection to open a new account.  The CFPB also alleges that the bank knew that a significant portion of its revenue was at risk as a result of its policy, which also included offering bonuses for employees who obtained high opt-in rates, as well as requiring employees to obtain a certain opt-in threshold.

The CFPB alleges the bank was in violation of the Electric Fund Transfer Act (EFTA), 15 U.S.C. § 1693, and its implementing Regulation E (12 C.F.R. Part 1005) and sections 1031(a), 1036(a)(1), 1054, and 1055 of the Consumer Financial Protection Act of 2010 (CFPA), codified at 12 U.S.C. §§ 5531(a),5536(a)(1), 5564, and 5565.  The CFPB alleges the bank violated the EFTA and the CFPA by:

  • Placing the overdraft opt-in provision of the contract immediately after the mandatory terms and conditions of the contract, which a consumer was required to agree to in order ​to open​ a new account;
  • Providing employees with a script about the opt-in provision that did not explain that it was optional or could amount to fees;
  • Providing employees with a script to call existing customers to ask if they wanted their accounts “to continue to work as [they] do today,” and, if a consumer answered in the affirmative, were then required to pay overdraft fees; and
  • Encouraging employees to use “emotionally charged” hypotheticals to sell the product.

The CFPB seeks an injunction, civil penalties, consumer relief, and its costs in bringing the suit.


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