A Regions Bank sign decorates the facade of the Tallen Building in this file photo.The Consumer Financial Protection Bureau has fined Regions Bank $7.5 million for illegally charging customers for overdraft protection.
Regions Bank, one of the biggest banks in Chattanooga with local assets of more than $1 billion, has branches across 16 states and has already refunded $49 million in overdraft fees to its customers. The CFPB said Tuesday the Birmingham, Ala.-based bank will have to hire a consultant to determine if more customers are due refunds.
Since July 2010 the Federal Reserve has required banks to have customers opt in before charging them for overdraft protection services. The CFPB said Regions Bank did not change its systems until July 2012, and didn't fully comply with the rules until August 2013.
The CFPB said the fine could have been much higher if the bank hadn't self-reported the violation to regulators.
When the overdraft protection rule was first implemented by regulators, Regions Bank did not apply it to situations when consumers had one Regions account linked to a second Regions account, such as a savings account or line of credit. In circumstances where the combined balance in both the accounts was not enough to cover a transaction, Regions would sometimes pay the transaction through its overdraft service and charge an overdraft fee of up to $36. But Regions failed to obtain consumer consent from many of these customers for this overdraft service, CFPB said.
The agency estimates the failure to get required consumer permissions resulted in customers paying tens of millions of dollars in illegal overdraft fees.
"At the Consumer Bureau, we take the issue of overdrafts very seriously," said Cara Peterson of the CFPB enforcement office. "Opting consumers into overdraft without their permission can be very expensive...The study (in July 2014 by CFPB) found that, on average, opted-in accounts pay almost $260 per year in overdraft and non-sufficient funds fees, compared to just over $35 for non-opted-in accounts."