The Consumer Financial Protection Bureau announced a $122 million settlement with TD Bank, N.A. regarding the marketing and sale of its optional (DCA) overdraft service.
The Canadian bank, which has branches in Delaware and in more than 1,200 locations along the East Coast, was found to have violated regulations by charging overdraft fees for debit card transactions without obtaining the consent of customers.
The consent order from the federal agency requires TD Bank to provide an estimated $97 million in restitution to about 1.42 million consumers and to pay a civil money penalty of $25 million.
The Bureau also alleged that when presenting the program to new customers, TD Bank deceptively claimed DCA was a “free” service or benefit or that it was a “feature” or “package” that “comes with” new consumer-checking accounts. In fact, TD Bank charges customers $35 for each overdraft transaction
When TD Bank enrolled some consumers in the service over the phone, TD Bank inaccurately described the program, the bureau alleged.
In some instances, TD Bank engaged in abusive acts or practices by materially interfering with consumers’ ability to understand DCA’s terms and conditions. In some cases, TD Bank: required new customers to sign its overdraft notice with the “enrolled” option pre-checked without mentioning the service to the consumer at all; enrolled new customers i without requesting the customer’s oral enrollment decision; and deliberately obscured, or attempted to obscure, the overdraft notice to prevent a new customer’s review of their pre-marked “enrolled” status in DCA.
The consent order requires TD Bank to provide an estimated $97 million in restitution to about 1.42 million consumers. TD Bank must also pay a civil money penalty of $25 million.
“At TD, we put our customers first and our business is built on a foundation of ethics, integrity and trust,” said Greg Braca, CEO, TD Bank. “Throughout the period in question, TD had a clear process to secure formal consent before providing this service to customers, enabling them to make an informed and conscious choice. Prior to this settlement, TD had already voluntarily and proactively implemented enhancements to our Debit Card Advance disclosure and enrollment processes beginning in 2014. Although we disagree with the CFPB’s conclusions, we have cooperated fully to resolve this matter and are moving forward with a continued focus on meeting the needs of our customers.”
TD and its predecessor bank Commerce Bank had a business model that allowed customers to keep low balances in their accounts. In return, the bank, especially under Commerce ownership, paid low interest on savings accounts and charged what some saw as high overdraft fees when balances turned negative.
TD was in the news earlier when it removed its popular change counting machines amid charges that coins were being undercounted. The machines were removed.
