The Consumer Financial Protection Bureau (CFPB) has fined Atlantic Union Bank $6.2 million for allegedly fraudulently enrolling thousands of customers with checking accounts in overdraft services. According to the CFPB, Atlantic Union failed to give customers the correct information, as mandated by the Electronic Fund Transfer Act, when they signed up over the phone for its Opt-In Overdraft Privilege program.
The CFPB investigation revealed that Atlantic Union workers misrepresented other aspects of their terms and conditions and failed to provide consumers who had enrolled in overdraft coverage over the phone with a clear explanation of which transactions were covered by the overdraft program. Additionally, the bank disregarded legal requirements to disclose the terms and conditions of the overdraft service to consumers clearly and noticeably.
At least $5 million in illegal overdraft fees will be refunded to affected customers, and a $1.2 million penalty will be paid into the CFPB’s victims relief fund. Atlantic Union denies any wrongdoing and says it has made improvements to its overdraft program before the settlement.
The CFPB, which lumps overdraft costs under a larger category known as “junk fees,” has been outspoken and proactive in opposing banks’ introduction of these fees. The watchdog declared in October that $120 million, which included unexpected overdraft fees and NSF costs, had been returned as a consequence of CFPB examinations.
Atlantic Union has previously been the target of regulatory inquiry. The bank was found in violation of Regulation Z and the Truth in Lending Act in 2020 and was sentenced to pay a $500,000 civil money penalty in addition to $700,000 in restitution.
The CFPB’s action against Atlantic Union serves as a reminder of how important transparency and effective communication are in the banking sector. Financial institutions are required to make sure that their terms and conditions are disclosed to clients clearly and noticeably and that they never intentionally mislead or defraud them.
In the banking sector, overdraft fees have caused controversy since many customers and authorities believe they are unreasonable and can put borrowers in financial trouble. Instead of shielding consumers against fraud or mistakes, banks have come under fire for utilizing overdraft fees as a source of income.
Certain banks have made efforts to lower or completely get rid of overdraft fees in recent years. For instance, Wells Fargo, Chase, and Bank of America have all launched new checking accounts without overdraft fees.
Nonetheless, overdraft fees are still often used in the banking sector, and authorities are still keeping a close eye on banks’ operations. The CFPB’s action against Atlantic Union serves as a reminder to banks that they are obligated to comply with every regulation and law that applies and that they have to operate with transparency and fairness when interacting with customers.
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