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The Consumer Financial Protection Bureau (CFPB) has announced a $122 million settlement with TD Bank for illegal overdraft enrollment practices.
TD Bank will provide $97 million in restitution to approximately 1.42 million consumers, according to a release by the CFPB today. The activity included in the investigation took place between January 2014 and December 2018, impacting customers who opened new checking accounts and were charged nonrefunded or nonwaived “covered overdraft fees” for ATM or one-time debit card transactions.
The bank will also pay a civil penalty of $25 million. The bank admitted no wrongdoing.
The CFPB found the bank’s Debit Card Advance (DCA) program had been represented to customers as a free service or a feature that accompanied new checking accounts.
“In fact, TD Bank charges customers $35 for each overdraft transaction paid through DCA and DCA is an optional service that does not come with a consumer-checking account,” the CFPB release said.
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In some cases, TD Bank representatives misrepresented the types of transactions the program would cover, implied that DCA enrollment was automatic or failed to get customer consent to enroll them in the program. At some offsite account-opening events that took place at colleges or businesses, representatives didn’t always bring the DCA form with them to have new customers sign, according to the Bureau’s consent order.
Read More: Understanding Checking Account Overdraft Protection And Fees
The bank’s overdraft enrollment practices violated two pieces of regulation that protect consumers from being charged overdraft fees without their consent: the Electronic Fund Transfer Act (EFTA) and Regulation E, the CFPB release noted. In addition, the Bureau found the bank in violation of the Consumer Financial Protection Act of 2010 for deceptive marketing tactics and in violation of the Fair Credit Reporting Act.
“Throughout the period in question, TD had a clear process to secure formal consent before providing this service to customers, enabling them to make an informed and conscious choice,” said Greg Braca, president and CEO of TD Bank, in a Thursday evening release.
Banks collect more than $12 billion per year in overdraft fees, according to research by the Center for Responsible Lending.
As part of the settlement, TD Bank has been ordered to correct its DCA enrollment practices to make the consumer’s choice clearer when they consider enrollment. The bank had begun to update its DCA disclosures and enrollment process starting in 2014, Braca noted in his statement.
It’s unclear at this time how soon affected consumers will receive their share of the settlement. TD Bank has 60 days from August 19 to present a written plan for determining compensation amounts and managing distribution of redress payments to current and former customers.
The amount paid to the Civil Penalty Fund of the Bureau may be used to compensate victims of other cases, or to facilitate the CFPB’s financial literacy programs.
Read More: The CFPB: Protecting and Educating Financial Consumers
TD Bank has approximately 1,250 locations in the U.S. and is headquartered in Cherry Hill, New Jersey.