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Regions Bank Penalized for Surprise Overdraft Fees

Regions Bank is being ordered to return at least $141 million to customers harmed by its surprise overdraft fees. It will have to pay another $50 million into the Consumer Financial Protection Bureau’s victims relief fund.

The CFPB said that from August 2018 through July 2021, Regions charged customers surprise overdraft fees on certain ATM withdrawals and debit card purchases. The bank charged overdraft fees even after telling consumers they had sufficient funds at the time of the transactions, the consumer agency said.

Financial regulators have long cautioned banks against charging this type of overdraft fee. The CFPB also found that Regions leadership knew about and could have discontinued its surprise overdraft fee practices years earlier, but chose to wait while Regions pursued changes that would generate new fee revenue to make up for ending the illegal fees.

“Regions Bank raked in tens of millions of dollars in surprise overdraft fees every year, even after its own staff warned that the bank’s practices were illegal,” said CFPB Director Rohit Chopra. “Too often, large financial firms make a calculation that continuing to break the law is more profitable than following it. We have more work to do to change this mentality.”

In a prepared statement, Regions Bank said it “disagrees with the CFPB’s characterizations” but agreed to a settlement with the consumer agency because of its “desire to focus its attention on continuing to support customers through a wide range of account enhancements that have already lowered fees for many customers.”

Regions Bank Chief Legal Officer Tara Plimpton said the settlement “involves one type of overdraft fee that was previously charged when there was sufficient money in an account when a debit card or ATM transaction was authorized – but not when the transaction actually posted to the account, due to other transactions.”

“Over a year ago, Regions stopped charging this particular overdraft fee. We took this action as part of a broader series of enhancements,” Plimpton said.

“Core part” of its profit model

The overdraft fees weren’t just incidental revenue to Regions, CFPB charged. Instead, overdraft and non-sufficient funds fees are a core part of Regions Bank’s profit model and amount to 17.7% of Regions Bank’s 2019 non-interest income.

This is not the first time Regions has been caught engaging in illegal overdraft abuses. In 2015, the CFPB ordered Regions to refund $49 million to consumers and pay a $7.5 million penalty for charging overdraft fees to consumers who had not opted into overdraft protection and to consumers who had been told they would not be charged overdraft fees.

Surprise overdraft fees are common

Regions is hardly alone in the practice, according to the CFPB, which said that in many circumstances, financial institutions have created serious obstacles to consumers taking steps to anticipate and avoid overdraft fees.

“For instance, as in the case of Regions, the bank’s unintelligible and manipulative processes meant that even consumers closely monitoring their account balances and carefully calibrating their spending in accordance with the balances shown could not reasonably avoid surprise overdraft fees,” CFPB said in a news release. “Surprise overdraft fees can be especially harmful because customers may unknowingly rack up multiple overdraft fees on seemingly zero-risk transactions.”

Regions’ prolonged unlawful behavior

The CFPB found that from August 2018 through July 2021, Regions charged consumers approximately $141 million in unlawful authorized-positive fees. Specifically, Regions employed complex and counter-intuitive overdraft practices and manipulations such that its customers could not avoid the fees. Even Regions Bank’s own employees could not explain to customers why they incurred the overdraft fees.

Today’s CFPB order:

  • Requires Regions to provide at least $141 million in redress to affected consumers: Regions must refund at least $141 million in illegally assessed authorized-positive overdraft fees.
  • Bans Regions from charging authorized-positive fees: Regions is prohibited from charging authorized-positive overdraft fees.
  • Assesses a $50 million fine: Regions must pay a $50 million penalty to the CFPB, which will be deposited into the CFPB’s victims relief fund.

Read today’s order

To learn more about overdraft fees and banks’ overdraft practices, read the agency’s December 2021 overdraft fee data point reports along with the agency’s recent overdraft fee blog, Banks’ overdraft/NSF fee revenues evolve along with their policies.

Consumers can submit complaints about Regions Bank, or about other financial institutions, products and services, by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

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