The Consumer Financial Protection Bureau (CFPB) announced on Tuesday that the banking giant will pay a total of $250 million in penalties for having bogus accounts, with $100 million to be refunded to affected customers.
Bank of America has been accused by federal regulators of engaging in fraudulent activities, including the creation of bogus accounts, overcharging customers for overdraft fees, and withholding credit card rewards
According to CFPB Director Rohit Chopra, Bank of America unlawfully kept credit card rewards, imposed excessive fees, and opened bogus accounts. These actions not only violate the law but also erode customer confidence. Chopra emphasized that the CFPB is committed to eliminating such practices throughout the banking industry.
The CFPB alleges that Bank of America gained access to customer information without permission and used it to establish fraudulent bogus accounts. This accusation resembles the 2017 scandal involving Wells Fargo, where employees were found to have created millions of bogus accounts to meet aggressive sales targets.
As a result, customers incurred unwarranted fees, experienced negative impacts on their credit profiles, and had to devote time to rectifying errors.
The regulators claim that Bank of America unlawfully withheld promised credit card rewards and bonuses from customers who had signed up for their bogus accounts cards
Bank of America spokesperson Bill Haldin informed CBS News that the bank no longer imposes the fees that prompted the government’s fine. Haldin added, “We voluntarily reduced overdraft fees and eliminated all non-sufficient fund fees in the first half of 2022.” He highlighted that revenue from these fees has decreased by over 90% due to the bank’s significant changes.
However, the company did not directly address the allegations of opening bogus accounts and wrongfully denying reward points. The $250 million penalty imposed on Bank of America is one of the largest in its history. In 2022, the bank was fined $10 million for improper wage garnishment and paid an additional $225 million for mishandling state unemployment benefits during the pandemic. In 2014, it paid $727 million for illegally marketing credit card add-on products.
Consumer campaign director Mike Litt from U.S. PIRG, a consumer advocacy group, described Bank of America as a repeat offender. Litt commended the CFPB for its robust enforcement action and emphasized the importance of having a federal agency vigilantly monitoring the financial marketplace.
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