On January 3, 2018, the Consumer Financial Protection Bureau (CFPB) announced that it had entered into a $15.5 million consent order with a federally-chartered savings association bank. The consent order resolves allegations that the bank violated the Electronic Fund Transfer Act (EFTA) and Consumer Financial Protection Act (CFPA) between 2011 and 2016.
Specifically, the CFPB alleged that the bank violated the EFTA by failing to stop preauthorized electronic fund transfers after account holders notified the bank of their intention to cease payment. In some instances, the bank failed to enter stop payment orders because consumers requested to stop payments to payday loan lenders. The CFPB also alleged that, when consumers notified the bank of suspected errors in electronic fund transfers, it failed to promptly initiate error resolution investigations. The bank had separate procedures for consumers who notified it of a suspected error concerning a payday loan, requiring the consumer to contact the lender directly. Such consumers were also warned that, if they pursued error resolution, they were putting their savings association membership at risk.
The CFPB also alleged that the bank engaged in unfair acts or practices prohibited by the CFPA by reopening closed consumer deposit accounts without providing timely notice. When the accounts were reopened to process debits, some account balances became negative and subject to overdraft and other fees. According to the consent order, this practice of re-opening accounts potentially impacted consumers who closed their accounts because their stop payment order or error resolution requests were ineffective.
Pursuant to the consent order, the bank will change its policies for stop payment requests, error resolution, and re-opening closed accounts. The bank will also provide $12 million in redress to consumers affected by its error resolution practices and $270,521 in restitution to consumers affected by its account re-opening procedures. Finally, the bank will pay a $3.5 million civil money penalty to the CFPB.