Regions Bank has been found guilty for the second time in the last decade of charging illegal overdraft fees.
The Consumer Financial Protection Bureau found that between 2018 and 2021, Regions was charging overdraft fees on ATM withdrawals as well as debit card purchases, despite telling customers they had enough funds in their account to cover the transactions.
The CFPB also found that Regions' executives knew the error was occurring in the system but held off on making any changes until the bank could find a way to cover the losses from the fees. Overdraft and non-sufficient funds fees make up around 18% of the bank's non-interest income.
“Regions Bank raked in tens of millions of dollars in surprise overdraft fees every year, even after its own staff warned that the bank’s practices were illegal,” Rohit Chopra, director of the agency, said in a statement. “Too often, large financial firms make a calculation that continuing to break the law is more profitable than following it. We have more work to do to change this mentality.”
The fee was imposed in situations where there was sufficient money in the customer's account when the debit or ATM transaction was authorized but not when the transaction actually posted.
The bureau noted that Region's debit card transactions and ATM transactions are entered into the customer's account on the night the transaction occurred. Consumers do not control or have a way to track when a particular transaction is debited to their account.
According to the bureau, the bank staff could not explain to the customers why they were being charged these overdraft fees. The fees during this time totaled around $141 million.
The bank's “unintelligible and manipulative process” meant the customers who normally kept a close eye on their accounts and balances weren't even safe from incurring these fees.
Regions claimed that it made several changes to its accounts this year, including the elimination of overdraft protection transfer fees, a low-cost line of credit for short-term needs, non-sufficient funds fees, an early direct deposit feature, which makes customer's paychecks available up to two days early, and a reduction in the bank's caps on overdraft fees.
“Over a year ago, Regions stopped charging this particular overdraft fee,” Regions Bank Chief Legal Officer Tara Plimpton said. “Helping our customers build financial wellness is a top priority for Regions Bank. That is demonstrated through our enhanced services as well as our year-round commitment to providing free financial education and customized financial plans for consumers.”
Regions put out a statement saying that while they did not agree with the bureau's assessment of their business practices, they are happy to have the settlement behind them.
The bank is required to repay $141 million to customers and pay an additional $50 million in fines.
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