TD Bank Settlement $122 Million for Overdraft Practices

The Consumer Financial Protection Bureau (CFPB) announced a settlement with TD Bank, N.A. for $122 million – an estimated $97 million in restitution to be paid to approximately about 1.42 million consumers and a civil money penalty of $25 million, along with adjustments to the Bank’s processes. What was the reason for this hefty consent order with the CFPB? The CFPB’s consent order states that TD Bank violated the:

  • Electronic Funds Transfer Act and Regulation E by enrolling customers and charging them overdraft fees without their consent;
  • Consumer Financial Protection Act of 2010 (UDAAP) by making deceptive claims that its overdraft service was “free” and other similar statements. The Bank also engaged in abusive practices by interfering with a consumer’s ability to understand the terms and conditions of the service including requiring new customers to sign its overdraft notice with the “enrolled” option pre-checked without mentioning the service and obscuring the overdraft notice to prevent a new customer’s review of their pre-marked “enrolled” status; and
  • Fair Credit Reporting Act and Regulation V in failing to implement reasonable written policies and procedures related to the accuracy and integrity of consumer information furnished to two nationwide specialty consumer reporting agencies and did not conduct timely investigations of indirect consumer disputes concerning furnished information.

In addition to the $122 million restitution and CMP, the consent order also requires TD Bank to:

  • Correct its optional overdraft service enrollment practices,
  • Stop using pre-marked overdraft notices to obtain a consumer’s affirmative consent to enroll in its optional overdraft service, and
  • Adopt policies and procedures that will ensure the Bank’s furnishing practices concerning nationwide specialty consumer reporting agencies comply with all applicable Federal consumer financial laws.

Compliance Resource encourages financial institutions to periodically monitor enforcement actions. These actions are lessons other institutions can learn from by identifying similar issues at their own institutions and using the corrective actions as a road map to correcting potential violations before they occur.
Compliance Resource offers tools to help keep you up-to-date on recent enforcement actions and, therefore, avoid potential violations: 1) Our free enforcement action charts and 2) Periodic webinars such as “Lessons Learned – Recent Lending Compliance Enforcement Actions” and our upcoming September webinar “Deposit Hot Topics, Enforcement Actions, and Common Violations”.