Bank of America Ordered to Pay Millions of Dollars for Illegal Practices

 Posted on July 17, 2023 in Debt Collection

Banks and financial institutions often face scrutiny of their business practices. Since the financial crisis of 2008, multiple banks have been accused of engaging in illegal practices, and government agencies such as the Consumer Financial Protection Bureau (CFPB) may impose fines and other penalties against institutions that have taken actions to cause financial harm to customers. Bank of America, the second-largest bank in the United States, is one of the latest institutions to face these issues, and it was recently ordered to pay $250 million in fines, penalties, and customer refunds after investigators found that it had taken a number of illegal actions. To prevent similar penalties, banks will need to make sure they are following the correct practices when collecting debts or performing other types of transactions.

Penalties for Illegal Overdraft Fees, Garnishments, and Other Issues

The CFPB investigated Bank of America’s practices of charging overdraft fees when customers did not have enough money in their accounts to cover payments. A $35 fee would be charged in these situations, but the CFPB found that the bank would often charge this fee multiple times for the same transaction. This resulted in significant losses for many people, and it also generated substantial revenue for the bank.

The investigation also found that Bank of America had engaged in other illegal practices, including failing to provide customers with bonuses promised when they signed up for credit cards. The bank’s personnel had also opened accounts in customers’ names without receiving authorization to do so, resulting in some people being charged fees and experiencing lowered credit scores. In response to these findings, Bank of America was ordered to repay more than $100 million to customers that had been affected. The bank was also required to pay the CFPB penalties of $90 million, and a separate $60 million fine was imposed by the Office of the Comptroller of the Currency for violations of the laws related to overdraft fees.

Bank of America has faced multiple penalties in recent years due to allegations of unlawful practices. In 2022, the CFPB found that the bank had processed more than 3,500 illegal garnishment orders against customers’ bank accounts. These orders were submitted by out-of-state creditors, and in response, Bank of America froze the accounts of customers, garnished funds from accounts and sent them to creditors, and charged garnishment fees. In addition to repaying more than $500,000 of garnishment fees to customers, Bank of America was required to pay a $10 million civil penalty.

These cases illustrate the importance of following the correct laws and procedures when collecting debts or other types of payments from a bank’s customers. A garnishment order should generally be processed under the laws of the state where a bank’s customer is located, and the proper exemptions should apply to ensure that a garnishment will not leave an account holder with no financial resources to meet their needs. Banks or creditors that engage in illegal or unfair debt collection practices could face penalties, and they may face limits on their ability to collect the amounts owed.

Contact Our Illinois Bank Collections Lawyers

At Dimand Walinski Law Offices, P.C., our Chicago debt collection attorneys can help banks and other creditors understand their rights and their options under the law as they take steps to recover the amounts owed to them. We can ensure that all legal procedures are followed correctly so that creditors can avoid penalties and protect their financial interests. Contact us at 312-704-0771 to set up a consultation and learn more about our legal services.