CFPB hits Regions Bank with penalty related to surprise overdraft fees

The Consumer Financial Protection Bureau (CFPB) has hit Regions Bank with a penalty for charging customers illegal surprise overdraft fees.

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The CFPB ordered Regions Bank to pay $50 million to the CFPB’s victims relief fund and refund at least $141 million to customers harmed by its illegal surprise overdraft fees.

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 fees were charged even after telling consumers they had sufficient funds at the time of the transactions. The CFPB also determined that Regions leadership knew about it and could have discontinued its surprise overdraft fee practices years earlier but chose instead to pursue changes that would generate new fee revenue to make up for ending the illegal fees.

“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,” CFPB Director Rohit Chopra said. “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.”

The surprise overdraft fees are known as authorized-positive fees. The CFPB, as well as other federal regulators, had cautioned financial institutions against charging certain types of authorized-positive fees back in 2015. The CFPB said the bank employed complex and counter-intuitive overdraft practices and manipulations such that its customers could not avoid the fees. The bureau said that Regions Bank’s own employees could not explain to customers why they incurred the overdraft fees.

This is not the first time Regions has been hit with such a penalty. In 2015, Regions was ordered 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.

The Birmingham, Ala.-based bank, with more than $160 billion in consolidated assets, operates approximately 1,700 retail branches and 2,000 ATMs across 16 states. Overdraft and non-sufficient funds fees comprised 17.7 percent of Regions Bank’s 2019 non-interest income.