TD Bank, N.A., (Cherry Hill, N.J.), will be required to pay some $97 million in restitution to 1.42 million consumers plus a $25 million civil money penalty under a settlement reached with the federal consumer financial protection agency over the bank’s illegal overdraft practices related to its optional Debit Card Advance (DCA) dating back as far as January 2014, the bureau said Thursday.
The bank, which operates about 1,250 locations throughout much of the eastern U.S., was found by the Consumer Financial Protection Bureau (CFPB) to have engaged in overdraft enrollment practices that violated the Electronic Fund Transfer Act (EFTA) and the bureau’s Regulation E by charging consumers overdraft fees for ATM and one-time debit card transactions without getting consumers’ affirmative consent, the bureau said.
The bureau said TD Bank also engaged in deceptive and abusive acts or practices in violation of the Consumer Financial Protection Act of 2010; and engaged in practices prohibited by the Fair Credit Reporting Act (FCRA) and its implementing Regulation V.
TD Bank offered the optional DCA while also offering a standard overdraft service. In addition to the violations surrounding enrollments, the order published Thursday states that the bank promoted the optional service as covering some payments that can already be covered by the standard service. The order also noted other discrepancies in how the bank explained when DCA kicks in (the next business day after enrollment, not the day of) and how it works with the bank’s daily ATM withdrawal cap of $750 (the order states that contrary to what the bank told enrollees, multiple overdraft fees can apply).
In a press release, the CFPB said that TD Bank:
- 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.
- When presenting DCA to new customers, TD Bank deceptively claimed DCA was a “free” service or benefit or that it was a “feature” or “package” that “comes with” new consumer-checking accounts. In fact, TD Bank charges customers $35 for each overdraft transaction paid through DCA, an optional service that does not come with a consumer-checking account.
- When TD Bank enrolled some consumers in DCA over the phone, it deceptively described DCA as covering transactions unlikely to be covered by that service.
- In some instances, TD Bank engaged in abusive acts or practices by materially interfering with consumers’ ability to understand DCA’s terms and conditions. In some cases, TD Bank 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; and deliberately obscured, or attempted to obscure, the overdraft notice to prevent a new customer’s review of their pre-marked “enrolled” status in DCA.
- TD Bank violated the 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. It also failed to conduct timely investigations of indirect consumer disputes concerning its furnishing to one of those specialty agencies.
In addition to the $125 million in restitution and money penalty, the consent order released Thursday states that TD Bank must correct its DCA enrollment practices, stop using pre-marked overdraft notices to obtain a consumer’s affirmative consent to enroll in DCA, and 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,” the agency said.
The order, signed Aug. 19 by bureau Director Kathleen Kraninger, is set to terminate five years after its effective date. It requires the bank to show the order to any other entity