Regions Bank to pay $191M for 'surprise' OD fees

The CFPB has issued a consent order for a $50 million civil money penalty and consumer reimbursements of at least $141,000,000 in "surprise overdraft fees," which the Bureau also referred to as "authorized-positive overdraft fees," against Regions Bank.

According to the CFPB, 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. Financial regulators have 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 they chose to wait while Regions pursued changes that would generate new fee revenue to make up for ending the illegal fees.

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.

As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against charging certain types of authorized-positive fees, such as the ones Regions charged. In its Winter 2015 Supervisory Highlights, the CFPB described examination findings regarding unfair and deceptive practices in connection with authorized-positive fees. In July 2018, the Federal Reserve further explained that banks could identify and manage their legal risk by refraining from assessing such fees.

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.

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s 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.