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CFPB Issues Garnishment Enforcement Action Against Bank of America

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Bank of America said it has enhanced its compliance processes with state laws and will refund the fees to consumers. The order shows garnishment fee enforcements may be an area on the CFPB’s radar.

05/04/2022 1:30 P.M.

4 minute read

The Consumer Financial Protection Bureau has finalized an enforcement action against Bank of America for “processing illegal, out-of-state garnishment orders against its customers’ bank accounts,” according to a news release from the bureau.

“Bank of America unlawfully froze customer accounts, charged garnishment fees, garnished funds, and sent payments to creditors based on out-of-state garnishment court orders that should have been processed under the laws and protections of the states where the consumers lived,” the CFPB reports.

Bank of America issued a statement Wednesday:

“We have enhanced our processes to ensure compliance with all applicable state laws as we execute court orders. As part of this agreement, we will refund associated fees to customers involved in approximately 3,700 cases. We processed about 1 million garnishment court orders during the five years reviewed.”

The CFPB’s order requires Bank of America to refund or cancel imposed fees from unlawful garnishments, review and reform its system for processing garnishments, and pay a $10 million civil penalty, according to the news release.

“The CFPB found that Bank of America engaged in unfair and deceptive acts and practices that resulted in money from customers’ bank accounts being frozen or taken when the garnishments were not permissible under the state laws where the accounts were located,” according to the news release.

“Garnishment is an area where consumer groups have been vocal,” said Brownstein Hyatt Farber Schrek Shareholder Leah Dempsey. “Two things that caught my eye is that the consent order covers since August 1, 2011, so an almost 10-year period, and found that Bank of America garnished 3,700 out-of-state accounts, for $592,000 in garnishment fees. Those are pretty minimal numbers compared to the bank’s overall activity in a 10-year period. As such, I think there is more evidence for industry that concerns raised by consumers groups are at the top of the CFPB’s list, even if there are not voluminous and widespread problems in that area.”

Enforcement Action

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices.

The CFPB’s order requires Bank of America to:

    • Refund at least $592,000 in garnishment-related fees to harmed consumers.
    • Review and reform its system for processing garnishments, and it must notify courts or other garnishment issuers when accounts are located out-of-state.
    • Eliminate unenforceable clauses from its contracts.
    • Pay a $10 million dollar penalty to the CFPB, which will be deposited into the CFPB’s Civil Penalty Fund.

According to Bassford Remele Shareholder and ACA Board Member Michael Klutho, “the bottom line takeaway from CFPB’s order regarding the Bank of America garnishments, is if the garnishment summons is issued by a state other than the state where the consumer resides, the garnishment is not compliant because the exemptions available to the consumer must be the exemptions where the consumer resides.”

Read the bureau’s complete order here.

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

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