OCC and CFPB Reach $30 Million Settlement With South Dakota Bank Over Overdraft Fees

On July 20, 2018, the Office of the Comptroller of the Currency (OCC) and Consumer Financial Protection Bureau (CFPB) reached a $30 million settlement with a South Dakota bank over allegations that the bank had engaged in deceptive practices with respect to its overdraft services in violation of Section 5 of the Federal Trade Commission Act.

Under Regulation E, the bank was required by federal law to disclose and obtain a consumer’s affirmative consent to overdraft payments prior to charging a fee.  But the OCC, in its examinations of the bank, asserts that it identified certain deficiencies in the bank’s practices with respect to its offering of overdraft services.  According to the OCC Consent Order, between January 2010 and December 2013, the bank’s procedures for obtaining consumer “opt-ins” to the overdraft service were deceptive and failed to provide key information to allow consumers to make an informed choice about opting into the service.  While the Order suggests that the bank provided compliant written disclosures to consumers, the OCC alleges that bank employees were otherwise providing misleading information to consumers in violation of federal law.

The OCC worked in coordination with the CFPB on its action against the bank.  As referenced in the OCC Order, the CFPB had filed suit against the bank over similar allegations in January 2017 in federal court in Minnesota, but filed a Stipulated Final Judgment and Order the same day the OCC issued its Consent Order.  Collectively, the Orders require the bank to pay $25 million in restitution to affected consumers and $5 million in civil penalties.

Download PDF