The CFPB and the OCC announced that they have each entered into a consent order with Bank of America, N.A. for alleged violations arising from the Bank’s representment fee practices (“Fee Consent Orders”).  The CFPB also announced that it has entered into a second consent order with the Bank for alleged violations arising from certain of the Bank’s credit card-related practices. 

Representment fees.  The Fee Consent Orders both involve the Bank’s practice which ended in February 2022 of charging multiple non-sufficient funds (NSF) fees in connection with the re-presentment of the same unpaid transaction.  However, in addition to finding the Bank’s practice of charging multiple NSF fees to be unlawful, the OCC also found that the Bank had acted unlawfully when, after initially declining a transaction due to insufficient funds and charging an NSF fee, it would subsequently pay the transaction and charge an overdraft fee.

In its Fee Consent Order, the CFPB finds that the Bank’s charging of re-presentment NSF fees was an unfair act or practice in violation of the Consumer Financial Protection Act (CFPA).  According to the CFPB, the practice caused substantial injury that consumers could not reasonably avoid because they did not know when merchants would re-present transactions nor could consumers generally stop payments or revoke authorizations on transactions easily in time.  (We note that the CFPB continues to ignore the fact that a consumer can easily avoid these fees by keeping an accurate balance of the amount in their account.)  The CFPB also found that the substantial injury was not outweighed by any benefits to consumer or competition.  The CFPB makes no reference to any disclosures given by the Bank except to suggest that it would have deemed the Bank’s practice to be unfair regardless of any disclosures it gave.  Specifically, the CFPB states that consumers could not reasonably avoid re-presentment NSF fees “[w]hether or not consumers expected or understood that [the Bank] would charge a new $35 fee each time it returned the same transaction.”

In its Fee Consent Order, the OCC finds that the Bank’s practice of charging either an NSF fee or an overdraft fee on re-presented transactions was an unfair and deceptive practice in violation of Section 5 of the FTC Act.  The OCC finds the Bank’s practice to be unfair for the same reasons given by the CFPB.  (The OCC likewise ignores the fact that a consumer can avoid these fees by keeping an accurate account balance.)  In addition, the OCC finds that the Bank had engaged in a deceptive practice because its deposit agreement and disclosure and its schedule of fees (“Disclosures”) contained materially misleading representations and omissions regarding representment fees.  Specifically, the OCC states:

The Disclosures did not inform customers that they may be charged additional fees when a merchant resubmitted a transaction for payment.  Rather, the Bank’s Disclosures explained consumers could be assessed an overdraft or insufficient funds fee of “$35 [for] each item.”  The Disclosures defined an “item” in a way that could have led a reasonable customer to think an “item” and a “transaction” were the same thing.  And, the Disclosure did not clearly state that a merchant could resubmit a declined transaction for payment.  As such, a reasonable customer was likely to be misled that a transaction would only be subject to a single overdraft or insufficient funds fee.   

Both Fee Consent Orders recite that the Bank had already waived, refunded, or agreed to refund tens of millions of dollars to customers to whom it charged multiple representment fees.  The CFPB Fee Consent Order requires the Bank to provide consumers with redress for all unreimbursed representment NSF fees, providing not less than $80.4 million in total consumer redress.  The Fee Consent Orders also require the Bank to pay a $60 million civil money penalty to the CFPB and an additional $60 million civil money penalty to the OCC.

It is noteworthy that unlike the OCC (and the FDIC), the CFPB has not issued any guidance indicating that charging multiple representment fees could be an unfair or deceptive act or practice.  The CFPB, as well as the OCC and FDIC, has issued guidance indicating that charging “authorize positive, settle negative” (APSN) overdraft fees can be an unfair act or practice under the CFPA or Section 5 of the FTC Act.

Credit card practices.  In its second Consent Order with the Bank, the CFPB finds that the Bank engaged in deceptive acts or practices in violation of the CFPA in connection with promotions of rewards credit cards.  It also finds that the Bank violated the Truth in Lending Act (TILA) and the Fair Credit Reporting Act (FCRA) in connection with certain practices relating to the opening of credit card accounts.  (The Bank’s alleged TILA and FCRA violations are also found to be CFPA violations.)

With regard to rewards credit cards, the CFPB finds that some of the Bank’s online advertisements that promoted the cards by offering a sign-up bonus of cash or points did not expressly state that the bonus offers were limited to online applications and created the misleading impression that the offers were available to all applicants regardless of the application channel used.  The CFPB also finds that some consumers targeted to apply for a rewards credit card and who did apply had not received the promised advertised bonus because the Bank’s employees did not accurately complete the application process.

With regard to credit card account-opening practices, the CFPB finds that the Bank’s employees sometimes submitted applications for and issued credit cards without consumers’ consent.  In addition, the Bank used or obtained consumer reports in connection with these applications.  (The CFPB also finds that the Bank has addressed the root cause of these practices—individual sales goals and sales-based compensation-by eliminating sales goals both for compensation incentives and for performance management to incentivize financial center employees primarily responsible for opening consumer credit card accounts.)  The CFPB finds that the Bank’s alleged practices violated the TILA rule that prohibits the issuance of a credit card other than in response to an oral or written request or application for the card or as a renewal of, or substitute for, an accepted credit card.  Such practices were also found to have violated the FCRA prohibition on obtaining or using a consumer report without a permissible purpose.

The Consent Order requires the Bank to pay a $30 million civil money penalty to the CFPB and to provide consumer redress, such as adjustments to rewards accounts.