Santander to pay $10 million for overdraft practices

The Consumer Financial Protection Bureau (CFPB) has ordered Santander Bank, N.A. to pay a $10 million fine for illegal overdraft service practices. The CFPB's press release reports that Santander’s telemarketing vendor deceptively marketed the overdraft service and signed certain bank customers up for the service without their consent. In addition to paying the civil money penalty to the CFPB, Santander Bank must go back and give consumers the opportunity to provide their affirmative consent to overdraft service, not use a vendor to telemarket its overdraft service, and it must increase oversight of vendors it uses to telemarket consumer financial products or services.

The Bureau found that Santander Bank’s illegal and improper practices included:

• Signing consumers up for overdraft service without their consent: In some instances, Santander’s telemarketer briefly described Account Protector to consumers, then asked for the last four digits of their Social Security numbers, and enrolled them without their consent. In other instances, consumers said they did not want to enroll but requested information about the overdraft service, but the telemarketer enrolled them anyway. When Santander charged those consumers overdraft fees on ATM and one-time debit card transactions, it violated the opt-in rule.
• Deceiving consumers that overdraft service was free: Call representatives led consumers to believe that Account Protector was free, when in fact it could potentially cost them hundreds of dollars in fees. Some call representatives falsely suggested that consumers would not be charged a fee if they brought their account current within five business days of an overdraft. Other representatives implied that consumers would be charged fees only for emergency transactions, and that non-emergency purchases would not result in fees.
• Deceiving consumers about the fees they would face if they did not opt in: In some instances, call representatives told consumers the bank would charge overdraft fees on ATM and one-time debit card transactions regardless of whether they signed up for Account Protector. In fact, Santander could not charge those fees without the consumer’s consent. Some representatives even told consumers that they risked being charged additional fees if they did not sign up for Account Protector, when in fact the opposite was true.
• Falsely claiming the call was not a sales pitch: Call representatives falsely told consumers that “this is not a sales call” and that the reason for the call was that the bank had recently changed its name. In fact, the purpose of the call was to sell Account Protector, and Santander’s name change was irrelevant.
• Failing to stop its telemarketer’s deceptive tactics: Santander offered the telemarketer financial incentives to hit certain sales targets. Santander then failed to identify and stop the deceptive and other improper tactics that its telemarketer used to achieve those sales targets.

The Bureau found that Santander violated both the Electronic Fund Transfer Act and Regulation E, and the protections against unfair, deceptive or abusive acts or practices in the Dodd-Frank Act. In addition to paying the $10 million civil penalty to the Bureau's Civil Penalty Fund, Santander was ordered to:

• Validate all opt-ins associated with the telemarketer.
• Refrain from using a vendor to conduct outbound telemarketing of overdraft service to consumers, and may not require its own employees to generate a target number of opt-ins or provide its employees with financial incentives in connection with opt-ins.
• Increase oversight of all third-party telemarketers of consumer financial products or services.