CFPB Orders Bank of America to Pay Millions in Customer Refunds: Here's What You Need to Know [UPDATE]

The Consumer Financial Protection Bureau (CFPB) announced on July 11 that it has ordered Bank of America to refund at least $80.4 million to customers after determining that the bank had for years systematically engaged in unfair and deceptive business practices.

According to the CFPB’s press release, Bank of America has financially harmed hundreds of thousands of consumers by illegally withholding promised cash and bonus points rewards on credit cards, opening unauthorized credit card accounts for customers without their knowledge and “double-dipping” by allowing insufficient funds fees to be repeatedly charged to a consumer’s account for the same transaction.

The bank has also been ordered to pay a total of $90 million in penalties to the CFPB and $60 million in penalties to the Office of the Comptroller of the Currency (OCC).

Who will receive cash from the Bank of America orders?

Under the terms of the CFPB’s two consent orders, which were filed on July 11, Bank of America must provide refunds to the following three groups of customers:

According to the orders, Bank of America must cooperate with the CFPB and propose a plan for how to identify who was affected, determine the amounts they’re owed and issue the required refunds.

The CFPB specified that at least $80.4 million will be paid to consumers who were charged unlawful insufficient funds fees, and the refunds will be distributed through direct deposit (when possible) or paper checks.

The bank’s $90 million in penalties will be deposited into the CFPB’s civil penalty fund, where such fines are pooled and can be used to provide relief to consumers who have not been fully compensated for harms they suffered in similar cases.

When will I get my money?

Within 45 days of the filing of the consent orders, Bank of America must determine if there are qualifying consumers who did not receive rewards card sign-up bonuses and were not previously compensated. If the bank finds that additional redress is required, it must provide compensation to those consumers prior to a 90-day deadline.

In addition, Bank of America has 30 days from the filing of the orders to submit to the CFPB a comprehensive plan for providing redress to consumers affected by unauthorized account-openings. If the agency’s regional director has no objections to the proposed plan, the bank must provide all redress within one year.

Similarly, Bank of America has 90 days from the date of the filing to submit to the CFPB a plan for refunding customers who were charged unlawful insufficient funds fees. If and when the regional director approves the redress plan, the bank has 60 days to provide consumer refunds.

What did the CFPB say Bank of America did wrong?

The CFPB’s investigation found that Bank of America misled consumers about its rewards card bonus offers and failed to honor rewards promises for consumers who submitted credit card applications in person or over the phone.

According to the consent order, between 2012 and 2021, the bank offered consumers who signed up for its Bank of America Cash Rewards card, Premium Rewards card or Travel Rewards card a sign-up bonus of “$200 online cash rewards,” “50,000 online bonus points” or “25,000 online bonus points” based on the card in which they enrolled.

However, some of the rewards card advertisements and the online terms and conditions did not expressly disclose that the sign-up bonus offers applied only to online applications, the order says. The CFPB found that Bank of America misled consumers into believing that the rewards promises were open to all applicants, including those who signed up in person or over the phone. The order also claims that some consumers who were invited over the phone or in person to apply for a rewards card with a sign-up bonus were not given the advertised bonus because Bank of America employees inaccurately processed their applications.

Further, the CFPB found that, in order to achieve now-abandoned sales and performance goals, Bank of America employees illegally applied for credit cards and opened accounts for consumers without their knowledge or authorization, in violation of the Truth in Lending Act. In doing so, the company also breached the Fair Credit Reporting Act, as bank employees unlawfully obtained and used consumers’ credit reports without consent or a permissible purpose in order to complete the applications, the CFPB’s order relays.

Per the order, though sales-based incentives and performance goals for employees responsible for opening credit card accounts were eliminated in January 2023, affected consumers were charged unfair fees, suffered adverse impacts to their credit profiles and were forced to spend time and money investigating and correcting errors.

In a second consent order also filed on June 11, the CFPB found that Bank of America had for years employed a “double-dipping scheme” wherein it would repeatedly charge insufficient funds fees to a consumer’s account for the same transaction.

As the order tells it, between September 2018 and February 2022, if the bank declined an automated clearing house (ACH) transaction or check because a customer did not have enough funds in their account, the company assessed a $35 fee. However, declined transactions are often re-attempted multiple times by the merchant or payee, sometimes as soon as the next day, the order says. By assessing a new insufficient funds fee each time a transaction is re-presented, Bank of America financially harmed consumers and generated hundreds of millions of dollars in revenue, the CFPB states.

The order notes that Bank of America stopped assessing double fees on ACH transactions in November 2021 and, as of February 2022, no longer assesses insufficient funds fees on any transactions.

CFPB calls for Bank of America to make amends

Under the terms of the consent orders, Bank of America must now pay a total of $90 million to the CFPB—$60 million for assessing repeat insufficient funds fees and $30 million for its deceptive credit card rewards practices and creation of unauthorized accounts. Separately, the bank will pay a $60 million penalty to the OCC for its double-dipping fee practices, according to the CFPB press release.

The orders relay that Bank of America must also implement policy changes such as fully disclosing any limitations on bonus offers, providing rewards as advertised, collecting and retaining evidence that a consumer has authorized the opening of a credit card account and more.

The CFPB’s consent orders also outline plans for regular reporting and recordkeeping in order to ensure that Bank of America’s practices and policies are fair and beneficial to consumers.

“This is not the first enforcement action Bank of America has faced for illegal activity in its consumer business,” the CFPB’s press release says.

The agency ordered the bank to pay $727 million in consumer redress for unlawful credit card practices in 2014 and a $10 million penalty in 2022 for illegally garnishing the accounts of thousands of customers, the press release relays. That same year, Bank of America was fined $225 million by the CFPB and OCC and was required to pay hundreds of millions of dollars to compensate consumers for the mishandling of state unemployment benefits during the COVID-19 pandemic, the press release adds.

Is this a class action lawsuit? How can I join?

Importantly, this is not a class action lawsuit, and there’s nothing that Bank of America customers need to do to sign up or join.

The CFPB, like the Federal Trade Commission (FTC), is one of the federal agencies authorized to take action against institutions thought to be violating consumer protection laws. Through an enforcement action like the one detailed here, the CFPB can order a company to remedy the harm it has caused, including by providing restitution to injured consumers.

For more information on this enforcement action, check out the CFPB’s official press release. The consent orders can be read below.

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