Bank of America has been ordered to pay $250 million for illegally charging junk fees, withholding credit card rewards and opening fake accounts.
The Consumer Financial Protection Bureau (CFPB) accused the bank of harming hundreds of thousands of customers by systematically double-dipping on fees for account holders with insufficient funds.
Customers are in line for a $100 million refund – while the bank will be forced to pay $150 million in penalties to the CFPB and the Office of the Comptroller of the Currency (OCC).
Refunds will be processed automatically, Bank of America confirmed, but it could not say how much the average customer would be compensated.
Some of the allegations are reminiscent of the Wells Fargo scandal last decade when the bank was ordered to pay $190million after staff were found to be signing customers up to additional bank accounts and credit cards without their knowledge.
Earlier this year, the government pledged to crack down on sneaky junk fees, which inflate prices and make it difficult for consumers to know exactly how much they will end up paying for a service. The White House estimates these add-ons cost Americans around $65 billion every year.
‘Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent,’ said CFPB Director Rohit Chopra.
‘These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system.’
Last year alone, consumers paid over $7.7 billion in 2022 in overdraft and non-sufficient fund fees, according to the CFPB. The federal regulator has proposed a rule to rein in excessive credit card late fees – which it estimated raked in about $12 billion for credit card companies a year.
The watchdog accused Bank of America of deploying a ‘double-dipping scheme to harvest junk fees.’
‘Bank of America had a policy of charging customers $35 after the bank declined a transaction because the customer did not have enough funds in their account,’ the CFPB said in a statement.
‘The CFPB’s investigation found that Bank of America double-dipped by allowing fees to be repeatedly charged for the same transaction. Over a period of multiple years, Bank of America generated substantial additional revenue by illegally charging multiple $35 fees.’
It also claimed that in order to compete with other credit card companies, Bank of America targeted individuals with special offers of cash and points when signing up for a credit card.
It said the bank illegally withheld promised credit card account bonuses – such as cash rewards – to tens of thousands of customers. It also accuses the bank of failing to honor rewards promises for consumers who submitted applications over the phone or in person.
The federal regulator also said the bank misused sensitive customer information in order to open accounts.
‘From at least 2012, in order to reach now disbanded sales-based incentive goals and evaluation criteria, Bank of America employees illegally applied for and enrolled consumers in credit card accounts without consumers’ knowledge or authorization,’ the CFPB said.
‘In those cases, Bank of America illegally used or obtained consumers’ credit reports, without their permission, to complete applications.
‘Because of Bank of America’s actions, consumers were charged unjustified fees, suffered negative effects to their credit profiles, and had to spend time correcting errors.’