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Illegal overdraft charges have got Regions Bank in a muddle as the Federal government has fined it for $7.5 million.
The overdraft charges were levied without the permission of customers and hence, the fine. “We take the issue of overdraft fees very seriously and will be vigilant about making sure that consumers receive the protections they deserve,” Richard Cordray, the director of the Consumer Financial Protection Bureau, said in a statement.
Regions has already refunded about $49 million in fees to its customers from whom the overdraft was taken. A consent order was also filed on Tuesday with Regions, requiring the bank to give full refunds to any remaining affected customers. The Alabama-based bank is one of the country’s largest banks, with $119 billion in assets and about 1,700 branches in 16 states.
Overdraft fees are typically charged when customers make payments or withdrawals for more than is available in their accounts. The Federal government had earlier in 2010 passed a regulation asking the banks to first get the consent of its customers before overcharging them for the transaction. If customers don’t agree in advance to the arrangement, banks typically decline transactions that would cause a shortfall.
According to the bureau, Regions allowed customers to link their checking accounts to a savings account or a line of credit. After the link was set up, funds would automatically be transferred to cover a shortage in the customer’s checking account. However, Regions never provided customers with linked accounts the chance to agree to the overdraft service, which overrode the regulation. The bank also apparently waited almost a year after it was discovered to rectify it. The bank first caught the problem in August 2011, the consent order said, and stopped charging the fees in June 2012.
In early 2015, the bank discovered more accounts that had been improperly charged fees. The bank has agreed to hire an independent consultant to identify any remaining customers who were charged the illegal fees. The bank must also fix any negative reports to credit bureaus that resulted from the fees.
“After discovering that a small subset of customers had been charged fees in error, we reported it to the C.F.P.B. and began refunding the fees,” Regions noted. “We believe the vast majority of the refunds have been completed and we have made changes to our internal systems to resolve these matters.
The overdraft charges were levied without the permission of customers and hence, the fine. “We take the issue of overdraft fees very seriously and will be vigilant about making sure that consumers receive the protections they deserve,” Richard Cordray, the director of the Consumer Financial Protection Bureau, said in a statement.
Regions has already refunded about $49 million in fees to its customers from whom the overdraft was taken. A consent order was also filed on Tuesday with Regions, requiring the bank to give full refunds to any remaining affected customers. The Alabama-based bank is one of the country’s largest banks, with $119 billion in assets and about 1,700 branches in 16 states.
Overdraft fees are typically charged when customers make payments or withdrawals for more than is available in their accounts. The Federal government had earlier in 2010 passed a regulation asking the banks to first get the consent of its customers before overcharging them for the transaction. If customers don’t agree in advance to the arrangement, banks typically decline transactions that would cause a shortfall.
According to the bureau, Regions allowed customers to link their checking accounts to a savings account or a line of credit. After the link was set up, funds would automatically be transferred to cover a shortage in the customer’s checking account. However, Regions never provided customers with linked accounts the chance to agree to the overdraft service, which overrode the regulation. The bank also apparently waited almost a year after it was discovered to rectify it. The bank first caught the problem in August 2011, the consent order said, and stopped charging the fees in June 2012.
In early 2015, the bank discovered more accounts that had been improperly charged fees. The bank has agreed to hire an independent consultant to identify any remaining customers who were charged the illegal fees. The bank must also fix any negative reports to credit bureaus that resulted from the fees.
“After discovering that a small subset of customers had been charged fees in error, we reported it to the C.F.P.B. and began refunding the fees,” Regions noted. “We believe the vast majority of the refunds have been completed and we have made changes to our internal systems to resolve these matters.
