A $10 million penalty was ordered against Bank of America for processing illegal, out-of-state garnishment orders against its customers’ bank accounts, the federal consumer financial protection agency said.
According to the Consumer Financial Protection Bureau (CFPB), the bank (which the bureau said was the nation’s second-largest bank) “unlawfully froze customer accounts, charged garnishment fees, garnished funds, and sent payments to creditors based on out-of-state garnishment court orders that should have been processed under the laws and protections of the states where the consumers lived.”
The agency also said the bank violated federal law by inserting “unfair and unenforceable language” into customer contracts that “purported to limit customers’ rights to challenge garnishments.”
The bureau’s final order, it said, requires Bank of America to refund or cancel imposed fees from unlawful garnishments, review and reform its system for processing garnishments (such as by eliminating unenforceable clauses from its contracts), and pay the $10 million civil penalty.
The agency alleged that the bank, since Aug. 1, 2011, unlawfully garnished at least 3,700 out-of-state accounts. Bank customers whose accounts were garnished have paid at least $592,000 in garnishment fees, the agency said. “The CFPB found that Bank of America engaged in unfair and deceptive acts and practices that resulted in money from customers’ bank accounts being frozen or taken when the garnishments were not permissible under the state laws where the accounts were located.”
The bureau charged that in addition to imposing $592,000 in unlawful fees, the company harmed consumers by: deceiving customers about their rights; imposing unenforceable clauses in take-it-or-leave-it customer contracts; and failing to adhere to consumer protections governing customers’ bank accounts.