TD Bank Reaches $122 Million Settlement

TD Bank will pay millions of dollars to settle claims of issuing illegal overdraft fees after the bank reached an agreement with the Consumer Financial Protection Bureau.

On Aug. 20, TD Bank agreed to pay $97 million in restitution to roughly 1.42 million customers and an additional $25 million civil penalty. The payment will settle allegations brought by the Consumer Financial Protection Bureau, claiming the bank engaged in illegal overdraft fee practices.

In its announcement of the settlement, the Consumer Financial Protection Bureau stated, “The Bureau found that TD Bank’s overdraft enrollment practices violated the Electronic Fund Transfer Act (EFTA) and Regulation E by charging consumers overdraft fees for ATM and one-time debit card transactions without obtaining their affirmative consent, and that TD Bank engaged in deceptive and abusive acts or practices in violation of the Consumer Financial Protection Act of 2010 (CFPA).”

The usual overdraft fee charge occurs when a customer overdraws their checking account. Instead of having the debit card being outright declined, the bank will cover the difference of the purchase and charge the customer a fee for that service.

TD Bank engaged in practices that go against the current regulations in place for overdraft fees. Under current laws and regulations, banks have to give customers the option of opting in to overdraft programs before charging these fees.

According to the Consumer Financial Protection Bureau, TD Bank’s practices violated the Electronic Fund Transfer Act and Regulation E. Additionally, TD Bank violated the Consumer Financial Protection Act of 2010 for deceptive marketing tactics and in violation of the Fair Credit Reporting Act.

According to the consent order issued by the Consumer Financial Protection Bureau, TD Bank did not adhere to these regulations.

An investigation showed that between January 2014 and December 2018, customers who opened new checking accounts were charged nonrefunded or nonwaived “covered overdraft fees” for ATM or one-time debit card transactions without their consent.

“The Bureau further found that when presenting DCA 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 paid through DCA and DCA is an optional service that does not come with a consumer-checking account,” the Consumer Financial Protection Bureau announced in its report.

The investigation concluded that in some cases TD Bank enrolled its customers into the program without even telling them of its existence.

According to Forbes, at some offsite account-opening events at colleges or businesses, TD Bank representatives did not always bring the DCA form with them to have new customers sign.

“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,” said TD Bank President and CEO Greg Baraca.

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