Regions Bank to repay customers $141 million in illegal overdraft fees

For the second time in a decade, Regions Bank was discovered to have charged illegal overdraft fees, the federal government stated Wednesday, in a settlement that may require the financial institution to repay $141 million to customers and pay a further $50 million in fees.

In an investigation, the Consumer Financial Protection Bureau found that between 2018 and 2021 Regions was charging overdraft fees on some ATM withdrawals in addition to some debit card purchases, even after the Alabama-based financial institution advised the customers they’d sufficient funds in their account to cover the transactions.

The CFPB additionally discovered that Regions’ executives knew the error in their techniques was occurring, however held off making changes to their practices till the financial institution might discover methods to change the revenues lost from the fees. The company stated overdraft and non-sufficient funds fees — in any other case often known as a bounced verify payment — have been roughly 18% of the financial institution’s non-interest earnings in 2019.

“Regions Bank raked in tens of millions of dollars in surprise overdraft fees every year, even after its own staff warned that the bank’s practices were illegal,” Rohit Chopra, director of the company, stated in a press release. “Too often, large financial firms make a calculation that continuing to break the law is more profitable than following it. We have more work to do to change this mentality.”

In a press release, Regions stated that whereas it disagreed with the bureau’s evaluation of their business practices, it was happy to put the settlement behind it.

“Over a year ago, Regions stopped charging this particular overdraft fee,” stated Region’s Chief Legal Officer Tara Plimpton, in a press release. “We took this action as part of a broader series of enhancements … (that) include updating the bank’s posting order and transaction processing to give customers a clearer view of the money they have available for making purchases while avoiding fees.”

Raking in income 

This just isn’t the primary time Regions has been fined for its overdraft payment practices. In 2015, the bureau ordered Regions to refund $49 million and pay a $7.5 million penalty for charging overdraft fees. Those Regions’ customers have been charged for overdraft after they had opted out of the service.

Under President Biden the CFPB, which was created in the wake of the 2008 monetary disaster to shield customers from monetary abuse, has taken a dim view of onerous overdraft fees. The company stated earlier this year that customers pay no less than $29 billion yearly in what it describes as extreme fees. 

During the pandemic, the common payment for overdrawing an account was $33.58, in accordance to Bankrate. Big U.S. banks have generated about $9 billion yearly in income from overdraft, ATM and different fees in latest years, in accordance to the Center for Responsible Lending.

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