The Consumer Financial Protection Bureau announced it has ordered Santander Bank, N.A. to pay a $10 million fine for illegal overdraft service practices.
Santander is officially based in Wilmington, although its presence is limited to a branch in the city. The headquarters jobs are in Boston. It is part of a Spanish company that purchased Sovereign Bank.
The federal agency claimed Santander’s telemarketing vendor deceptively marketed the overdraft service and signed certain bank customers up for the service without their consent.
Overdraft protection has become a big source of income for banks, especially in markets where banks and credit unions have reduced or waived fees for maintaining checking accounts.
In addition to paying the civil money penalty to the CFPB, Santander Bank must go back and give consumers the opportunity to provide their affirmative consent to overdraft service, not use a vendor to telemarket its overdraft service, and it must increase oversight of vendors it uses to telemarket consumer financial products or services, a CFPB release stated.
“Santander tricked consumers into signing up for an overdraft service they didn’t want and charged them fees,” said CFPB Director Richard Cordray. “Santander’s telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service. We will put a stop to any such unlawful practices that harm consumers.”
Santander Bank operates a network of nearly 700 retail branch offices in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island.
Santander offers overdraft service with its checking accounts.
From 2010 to 2014, Santander marketed and enrolled consumers in its “Account Protector” overdraft service for ATM and one-time debit card transactions, and charged consumers $35 per overdraft. Santander used a telemarketer to call consumers to persuade them to opt in to the overdraft service and rewarded the telemarketer with a higher hourly rate when it hit specified sales targets, the release stated.
In 2010, federal rules took effect prohibiting banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers affirmatively opt in. If consumers don’t opt in, banks may decline the transactions because of insufficient or unavailable funds, and can’t charge an overdraft fee.
The Consumer Financial Protection Bureau has long been opposed by the financial services industry.
The agency was proposed by Elizabeth Warren, who at the time was a law professor. President Obama took Warren out of consideration at a candidate to head the agency, following stiff opposition in the U.S. Senate.
Warren went on to remain a vocal critic of the industry when she was elected to the U.S. Senate.
