On July 11, Bank of America Corp. was accused of fraudulent activity by the Consumer Financial Protection Bureau over several services that it provides, resulting in fees of $250 million.
Allegedly spanning over a few years, the director of the bureau stated that “Bank of America wrongfully withheld credit card rewards, double-dipped on fees and opened accounts without consent.”
Diving into these accusations in detail, the first allegation regarded repeated charges over the same fees. While bank fees for overdrafts are common across different banks, Bank of America’s one-time $35 fee per transaction was improperly double charged as accumulated illegal income.
Bank of America would entice customers with exclusive credit card benefits, such as cash rewards and bonus points, when they applied for a credit card.
However, the bank unlawfully withheld these promised account bonuses from tens of thousands of customers. Both those who applied in person and over the phone suffered from the bank’s failure to fulfill its rewards commitments. Additionally, Bank of America denied sign-up bonuses to customers, citing issues with its internal business processes and systems.
Since 2012, Bank of America employees engaged in unlawful practices to achieve sales-based targets and evaluation criteria that no longer exist. They did so by secretly applying for and enrolling consumers in credit card accounts without their consent or knowledge.
Moreover, the bank illegally accessed and utilized consumers’ credit reports without obtaining proper authorization to complete these applications. As a result, customers were unfairly burdened with fees and faced detrimental impacts on their credit histories.
This isn’t the first time Bank of America faced enforcement action for illicit activities within its consumer business.
In 2014, the CFPB mandated the bank provide $727 million in restitution to victims affected by illegal credit card practices. Subsequently, in May 2022, the CFPB ordered Bank of America to pay a $10 million civil penalty concerning unauthorized levies. During that same year, both the CFPB and the U.S. Office of the Comptroller of the Currency imposed a $225 million fine on Bank of America. Furthermore, they compelled it to disburse hundreds of millions of dollars in restitution to consumers due to mishandling state unemployment benefits during the peak of the COVID-19 pandemic.
Breaking down the $250 million in fees charged to Bank of America, $100 million will go to consumers that were affected and $150 million will be in penalty charges to the CFPB and the OCC.
The Biden Administration released a statement on Feb 1 in hopes of fostering economic competition in America. The CFPB proposed a rule to significantly reduce excessive credit card late fees, in accordance with its authority under the bipartisan Credit CARD Act of 2009.
Introduced on April 3, Arizona Democrat Ruben Gallego’s brought forth a bill in the House “to limit and eliminate excessive, hidden and unnecessary fees imposed on consumers, and for other purposes.” If passed, the law would be regarded as the Junk Fees Prevention Act.
Another American bank, Wells Fargo, was also accused of a similar crime back in December 2022 and ended up paying $3.7 billion for mishandling accounts, which included $2 billion in consumer compensation.
Other crimes often committed towards customers include unauthorized car repossessions, unjust denials of mortgage loan adjustments and incorrectly charged overdraft fees to customers who had enough in their accounts.
The consensus among financial experts clearly indicates that Bank of America’s reputation and consumer trust have indisputably suffered.
