The bank exploited thousands of customers by charging them overdraft fees without proper consent and misleading them about coverage, according to the bureau’s investigation.
12/07/2023 3:40 P.M.
3 minute read
The Consumer Financial Protection Bureau announced this week that it has taken action against Atlantic Union Bank, a subsidiary of Atlantic Union Bankshares Corp., for engaging in illegal overdraft practices.
The enforcement action (PDF), led by CFPB Director Rohit Chopra, sheds light on Atlantic Union Bank’s misleading conduct, ultimately resulting in a mandate to refund at least $5 million in illegally obtained overdraft fees and pay a $1.2 million penalty to the CFPB’s victims relief fund, according to a news release.
“Atlantic Union Bank harvested millions of dollars in overdraft fees through a host of illegal practices,” Chopra said.
The CFPB’s investigation uncovered that the bank violated federal law by:
- “Charging fees without proper consent: At Atlantic Union Bank branches, employees gave oral descriptions of the bank’s overdraft coverage to new customers who opened checking accounts. Employees sought oral confirmation from customers to enroll in overdraft coverage before providing them with the required written disclosures describing the terms of service.
- Misleading customers about the terms and costs of overdraft coverage: For customers who enrolled in overdraft coverage by phone, Atlantic Union Bank employees did not clearly explain which transactions were covered by the service, and made other misleading statements about the terms and conditions of the service. In some calls, bank employees also omitted key information about the cost of the service and the fact that consumers could incur a hefty overdraft fee for each transaction covered by the service.”
Under the Consumer Financial Protection Act (CFPA), the CFPB has the authority to take swift action against institutions found in violation of consumer financial laws, especially those engaging in unfair, deceptive, or abusive acts. In this case, Atlantic Union Bank’s transgressions against the Electronic Fund Transfer Act’s opt-in requirements for overdraft services and its deceptive practices under the CFPA led to a comprehensive enforcement action.
Possible Overdraft Fee Rule
The CFPB is in the pre-rule stages for overdraft fee regulations, according to its regulatory agenda.
In hearings with the Senate Committee on Banking, Housing and Urban Affairs and House Financial Services Committee earlier this month, members of Congress asked CFPB Director Rohit Chopra about a possible rule from the bureau on overdraft fees.
In the House discussion, U.S. Rep. Roger Williams, R-Texas, asked Chopra if the bureau is seeking to remove overdraft programs. Chopra responded that the CFPB has received requests to provide clarity on the programs, but the bureau is not seeking to eliminate overdraft products, according to a summary from Brownstein Hyatt Farber Schreck.
When asked about the status of a rule on overdraft fees, Chopra said the bureau has not made an official decision on moving forward with rulemaking but that the ideal goal is to propose a rule to ensure protection against overdraft fee abuses.
The issue was also discussed in the Senate committee hearing, where committee members asked about the timing of an overdraft protection rule proposal, according to Brownstein.
While Chopra did not have a specific time frame, he said the bureau is examining the Federal Reserve’s actions on fees for paper checks and mailing checks and noted that banks are competing on their overdraft services by lowering fees.
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