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September 28, 2022

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CFPB Orders Regions Bank to Pay $191 Million for Illegal Surprise Overdraft Fees

Repeat offender will refund at least $141 million to customers and pay $50 million penalty

WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) is ordering Regions Bank to pay $50 million into the CFPB’s victims relief fund and to refund at least $141 million to customers harmed by its illegal surprise overdraft fees. From August 2018 through July 2021, Regions charged customers surprise overdraft fees on certain ATM withdrawals and debit card purchases. The bank charged overdraft fees even after telling consumers they had sufficient funds at the time of the transactions. Financial regulators have long cautioned banks against charging this type of overdraft fee. The CFPB also found that Regions leadership knew about and could have discontinued its surprise overdraft fee practices years earlier, but they chose to wait while Regions pursued 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,” said CFPB Director Rohit Chopra. “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.”

Regions Bank (NASDAQ:RF) is based in Birmingham, Ala., with more than $160 billion in consolidated assets. It operates approximately 1,700 retail branches and 2,000 ATMs across 16 states. It offers and provides an array of financial products and services to consumers, including deposit accounts, credit cards, and lines of credit. Overdraft and non-sufficient funds fees are a core part of Regions Bank’s profit model. In fact, overdraft and non-sufficient funds fees were 17.7% of Regions Bank’s 2019 non-interest income.

This is not the first time Regions has been caught engaging in illegal overdraft abuses. In 2015, the CFPB ordered Regions 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 and to consumers who had been told they would not be charged overdraft fees.

Surprise Overdraft Fees

The CFPB has observed that in many circumstances, financial institutions have created serious obstacles to consumers taking steps to anticipate and avoid overdraft fees. For instance, as in the case of Regions, the bank’s unintelligible and manipulative processes meant that even consumers closely monitoring their account balances and carefully calibrating their spending in accordance with the balances shown could not reasonably avoid surprise overdraft fees. Surprise overdraft fees can be especially harmful because customers may unknowingly rack up multiple overdraft fees on seemingly zero-risk transactions.

Regions charged a type of surprise overdraft fee known as an authorized-positive fee. As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against charging certain types of authorized-positive fees, such as the ones Regions charged. In its Winter 2015 Supervisory Highlights, the CFPB described examination findings regarding unfair and deceptive practices in connection with authorized-positive fees. In July 2018, the Federal Reserve further explained that banks could identify and manage their legal risk by refraining from assessing such fees.

Regions Bank's Prolonged Unlawful Behavior

The CFPB found that from August 2018 through July 2021, Regions charged consumers approximately $141 million in unlawful authorized-positive fees. Specifically, Regions employed complex and counter-intuitive overdraft practices and manipulations such that its customers could not avoid the fees. Even Regions Bank’s own employees could not explain to customers why they incurred the overdraft fees.

Enforcement Action

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s order:

  • Requires Regions to provide at least $141 million in redress to affected consumers: Regions must refund at least $141 million in illegally assessed authorized-positive overdraft fees.

  • Bans Regions from charging authorized-positive fees: Regions is prohibited from charging authorized-positive overdraft fees.

  • Assesses a $50 million fine: Regions must pay a $50 million penalty to the CFPB, which will be deposited into the CFPB’s victims relief fund.

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