Regions Bank fined $7.5 million for overdraft fees
Regions Bank (RF) will have to pay a $7.5 million fine for improperly charging hundreds of thousands of its customers overdraft fees, the Consumer Financial Protection Bureau said Tuesday.
The Birmingham, Alabama-based bank, which has 1,700 branches in 16 states, will have to refund at least $49 million to consumers who did not choose to opt-in for overdraft coverage, the federal agency said.
"Regions Bank failed to ask consumers if they wanted overdraft service before charging them fees," CFPB Director Richard Cordray said in a statement. "In the end, hundreds of thousands of consumers paid at least $49 million in illegal charges."
Under federal rules, banks starting in 2010 had to ask their customers whether they wanted to opt-in to overdraft protection coverage. Having the coverage means that the bank can advance the difference - and charge a fee - if a customer spends more money than is in their checking account.
For those who don't opt-in and try to use their debit card for a transaction that costs more than the cash in their account, the transaction would be declined.
Regions Bank neglected to ask customers who had checking accounts linked to lines of credit or savings accounts whether they wanted to opt-in to overdraft protection, the CFPB said. Instead, the bank acted as if they had and assessed fees up to $36 for each transaction that exceeded what was available.
It took two years after the federal law took effect for the bank to stop assessing the fees, and earlier this year, Regions found still more accounts that were impacted, according to the CFPB.
"After discovering that a small subset of customers had been charged fees in error, we reported it to the CFPB and began refunding the fees. We believe the vast majority of the refunds have been completed and we have made changes to our internal systems to resolve these matters" Regions spokeswoman Evelyn Mitchell emailed.
