TD Bank to pay $122 million to settle with CFPB for OD practices

The Consumer Financial Protection Bureau (Bureau) has announced a settlement with TD Bank, N.A. regarding its marketing and sale of its optional overdraft service: Debit Card Advance (DCA). TD Bank is headquartered in Cherry Hill, New Jersey, and operates about 1,250 locations throughout much of the eastern part of the country. The Bureau found that TD Bank’s overdraft enrollment practices violated the Electronic Fund Transfer Act (EFTA) and Regulation E by charging consumers overdraft fees for ATM and one-time debit card transactions without obtaining their affirmative consent, and that TD Bank engaged in deceptive and abusive acts or practices in violation of the Consumer Financial Protection Act of 2010 (CFPA). The Bureau also found that TD Bank engaged in practices prohibited by the Fair Credit Reporting Act (FCRA) and its implementing Regulation V. The consent order requires TD Bank to provide an estimated $97 million in restitution to about 1.42 million consumers and to pay a civil money penalty of $25 million.

The Bureau found that TD Bank, N.A:

• charged consumers overdraft fees for ATM and one-time debit card transactions without obtaining their affirmative consent in violation of EFTA and Regulation E, both after new customers opened checking accounts at TD Bank branches and after new customers opened checking accounts at events held outside of Bank branches.
• claimed DCA was a “free” service or benefit or that it was a “feature” or “package” that “comes with” new consumer-checking accounts, when the bank charges customers $35 for each overdraft transaction and DCA is an optional service.
• deceptively described DCA as covering transactions unlikely to be covered by DCA when enrolling some DCA consumers by thelephone
• engaged in abusive acts or practices by materially interfering with consumers’ ability to understand DCA’s terms and conditions
• required new customers to sign its overdraft notice with the “enrolled” option pre-checked without mentioning the DCA service to the consumer at all
• enrolled new customers in DCA without requesting the customer’s oral enrollment decision
• deliberately obscured, or attempted to obscure, the overdraft notice to prevent a new customer’s review of their pre-marked “enrolled” status in DCA

The Bureau also found that TD Bank:

• violated FCRA and Regulation V by failing to establish and implement reasonable written policies and procedures concerning the accuracy and integrity of consumer-account information it furnished to two nationwide specialty consumer reporting agencies
• failed to conduct timely investigations of indirect consumer disputes concerning its furnishing to one of those specialty agencies

In addition to paying restitution and the $25 million civil money penalty, the bank was ordered to:

• correct its DCA enrollment practices
• stop using pre-marked overdraft notices to obtain a consumer’s affirmative consent to enroll in DCA
• adopt policies and procedures designed to ensure that TD Bank’s furnishing practices concerning nationwide specialty consumer reporting agencies comply with all applicable Federal consumer financial laws