M&T Bank has been fined $200,000 and must refund $2.9 million for deceiving consumers with advertisements promoting free checking accounts that led them to be charged fees, the Consumer Financial Protection Bureau said on Thursday.
With "no strings attached" free checking as the lure to attract new customers, M&T Bank neglected to mention that unless the customers met certain requirements, their accounts would be converted to checking accounts that charged fees. About 59,000 customers of the bank are due refunds, the CFPB said.
"Although M&T promised people free checking, tens of thousands of consumers ended up paying for a product they had thought was free," CFPB director Richard Cordray said in a statement. "This is an important reminder to all banks and credit unions that they cannot misstate to consumers whether a financial product or service is free."
The agency said it discovered that M&T was shifting customers from free accounts to accounts with fees during a routine inspection of the Buffalo, N.Y.-headquartered bank. Federal rules prescribe when an account can be described as free or no cost. And it must not have any "maintenance or activity fees, or any fees to deposit, withdraw, or transfer money."
M&T customers were required to have a minimum amount of activity in their accounts to keep their accounts free, the CFPB said. When they were converted to another type of checking, customers who didn't have a balance of $1,500 were hit with monthly fees ranging from $5 to $14. About 80,000 customers were converted to those accounts, with about 59,000 falling below that level.