The U.S. Consumer Financial Protection Bureau has hit Regions Bank, tops in market share among Mississippi banks, with a $7.5 million fine for “illegal actions” on over-draft fees.
The CFPB has already forced the Alabama-based multi-state bank to refund customers $49 million in wrongfully collected overdraft charges.
The enforcement action announced this week charges the $122-billion Regions assessed overdraft fees on consumers who had not opted-in for overdraft coverage.
“We’re requiring Regions Bank to fully refund all affected consumers – hundreds of thousands of consumers have already been refunded $49 million in fees,” the CFPB said in a press statement. “We’re also fining the company $7.5 million for its illegal actions and its slow response to correct the errors.”
The banking company delayed fixes to the problem for a year after discovering them, the Birmingham Business Journal reported.
The repayments to customers came in 2012 and 2013. In January 2015, the bank identified more affected customers and is now required to provide them with a full refund, the Birmingham Business Journal said.
Region’s Birmingham headquarters limited its public comments to a single paragraph. It insisted that only a “small subset” of customers had been charged in error, though the statement did not detail how the reimbursements grew to nearly $50 million:
“After discovering that a small subset of customers had been charged fees in error, we reported it to the CFPB and began refunding the fees,” Regions said. “ We believe the vast majority of the refunds have been completed and we have made changes to our internal systems to resolve these matters.”
Bank checking account customers have a choice when it comes to overdraft protection. These protections can be costly, the CFPB noted.
An overdraft occurs when an account holder does not have enough money in his account to cover a transaction, but the bank pays for it anyway. Transactions include ATM withdrawals and debit card purchases.
Many banks and credit unions offer overdraft protection programs in which your institution will pay for the transaction and charge you a fee (in addition to requiring you to repay the overdraft amount). For most banks, the overdraft fee is a fixed amount of $35 or thereabouts regardless of the amount of the transaction.
A customer can incur several fees in a single day.
Account holders can choose not to have debit overdraft. A bank or credit union can’t charge overdraft fees on ATM or debit card transactions unless the account holder is enrolled in an overdraft protection program.
If an account holder does not enroll, a bank will likely decline ATM or debit card purchases when the customer’s account doesn’t have enough funds to cover them. No fee should be charged, however.
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