Bank of America Settles for $250 Million Over Financial Misconduct

Bank of America has consented to a $250 million settlement to address allegations of financial misconduct, including overcharging fees and opening unauthorized accounts. The settlement, agreed upon on Tuesday, comprises $100 million in restitution to affected consumers and an additional $150 million in civil penalties.

The Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) accused the bank of violating several U.S. laws since 2012. The CFPB highlighted that from February 2018 to February 2022, Bank of America charged customers multiple fees for insufficient funds in their accounts, accumulating hundreds of millions of dollars. These fees were deemed unreasonable by consumers who could not anticipate being charged $35 each time a transaction was declined.

Bank of America responded, stating that it voluntarily eliminated or reduced various fees last year. However, the CFPB is actively targeting such “junk fees,” which include overdraft and insufficient fund charges, citing them as unfair charges for banking services.

CFPB Director Rohit Chopra emphasized the illegal nature of these practices and the agency’s commitment to eliminating them across the banking sector.

The bank faced accusations of enrolling consumers in credit card accounts without their knowledge, driven by sales pressure or incentives for employees. This practice affected a “small percentage” of new accounts. The bank also failed to fulfill promises of cash rewards and bonus points to numerous credit card customers.

As part of the settlement, Bank of America will update regulators on its compliance progress within a year. The bank stated it had significantly reduced its revenue from these fees by over 90 percent after reducing overdraft fees and eliminating non-sufficient fund fees in early 2022.

Senator Sherrod Brown criticized the actions, labeling them as an example of U.S. banks exploiting Americans for profit.

In a separate issue, Merrill Lynch, Bank of America’s financial advisory branch, agreed to pay $12 million in penalties to the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) for failing to report suspicious activities from January 2009 to November 2019. Merrill Lynch acknowledged the issue in 2019 and reported it to regulators, enhancing their filing process and training subsequently.

Despite the early trading losses, Bank of America shares increased by 1.1 percent by 2:02 pm ET.

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