By Jacob Bielanski
After the CFPB argued TD Bank misled customers into an optional program that charged $35 fees for ATM and debit card-based overdrafts, the bank agreed to pay a penalty and restitution, but admitted no wrongdoing as it plans to continue the program.
TD Bank will pay $97 million in restitution and $25 million in penalties as part of a consent order with the Consumer Financial Protection Bureau stemming from an investigation of the bank’s "Debit Card Advance" (DCA) program dating back to 2014. The CFPB said the DCA program, and its subsequent marketing, violated parts of the Regulation E of the Electronic Fund Transfer Act (EFTA) as well as the deceptive and abusive acts or practices defined under the Consumer Financial Protection Act (CFPA).
In a statement following the filing, TD Bank President and CEO Greg Braca said it disagreed with the CFPB findings, but that the bank was cooperating "fully" to resolve the matter. The statement from the bank said the settlement includes no admission of wrongdoing by TD Bank, and that DCA would continue to be offered to its customers.
Bureau investigators alleged that TD Bank systematically misled customers about its DCA program while customers signed up for a checking account in violation of the CFPA. While the program was an optional overdraft service, in which ATM and one-time debit transactions would be covered by the bank in the event of insufficient funds in excess of $5, for a $35 fee, up to five times per day, the CFPB said it found managers routinely instructed employees to present DCA as something that was "free" and "comes with" the checking accounts as a "feature."
In the settlement, the CFPB also alleged that employees routinely failed to tell customers that the accounts already covered a number of transactions under its "standard" program, specifically transactions not governed by 12 CFR § 1005.17(b), including ACH or paper-based check withdrawals.
TD Bank ran afoul of the EFTA, according to the CFPB, by then failing to provide proper disclosures about the program before using customers’ oral consent to prepare a final account opening document with DCA enrollment pre-checked. That pre-checked document, the CFPB said, meant customers were not "affirmatively" consenting to the program, as opting out would require a new set of forms be prepared without the checkmark.
The CFPB said in its consent order that the "misleading or incomplete" presentations about DCA plus the banks process of only providing disclosure forms as part of the final step to opening accounts, meant that TD bank "materially interfered with consumers’ ability to understand the terms and conditions of DCA." Investigators also charged TD Bank with violating Regulation V of the Fair Credit Reporting Act.
In addition to restitution paid to approximately 1.42 million customers charged under the DCA program who did not otherwise already receive a refund of fees, the recent consent order requires TDA bank to correct its DCA enrollment process, including no longer using the pre-checked form as part of obtaining a customer’s consent.
Companies: TD Bank
MainStory: TopStory BankingOperations CFPB ChecksElectronicTransfers EnforcementActions FairCreditReporting UDAAP
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