Dive Brief:

• Regions Bank will pay $191 million to settle Consumer Financial Protection Bureau (CFPB) allegations that the bank charged customers “illegal surprise” overdraft fees on certain ATM withdrawals and debit card purchases between August 2018 and 2021, the regulator said Wednesday.
• The penalty encompasses a $50 million fine and $141 million the CFPB is ordering the Birmingham, Alabama-based lender to pay to customers hit with “authorized-positive” fees. The bank, in a statement Wednesday, said it eliminated authorized-positive fees more than a year ago, when it rearranged the order in which transactions were posted.
• The impact of the settlement will be reflected in Regions’ third-quarter earnings statement, the bank said Wednesday.

Dive Insight:

Regions Bank took $432 million in deposit service charges between April 2021 and March 2022. At 6.8%, that accounts for a greater proportion of operating revenue than any bank in the U.S. with more than $100 billion in assets, except for TD, S&P Global reported in May.

“Regions Bank raked in tens of millions of dollars in surprise overdraft fees every year, even after its own staff warned that the bank’s practices were illegal,” CFPB Director Rohit Chopra said in a statement Wednesday. “Too often, large financial firms make a calculation that continuing to break the law is more profitable than following it. We have more work to do to change this mentality.”

Overdraft and related fees have garnered loads of negative feedback from regulators and lawmakers alike, though the outcry has intensified since the COVID-19 pandemic began. Banks such as Citi and Capital One have eliminated the fees altogether, while others such as Bank of America, have reduced the amount they charge per instance. 

Regions is not immune to that momentum. The bank eliminated overdraft protection transfer fees and nonsufficient funds fees this year, it said Wednesday, and launched an early-wage access product and short-term, low-cost line of credit.

Regions “disagrees with the CFPB’s characterizations, the bank cooperated with the investigation and is pleased to move forward,” it said Wednesday. “Agreeing to the settlement reflects Regions’ desire to focus its attention on continuing to support customers through a wide range of account enhancements that have already lowered fees for many customers.”

The CFPB alleged Regions charged overdraft fees after telling consumers they had sufficient funds at the time of the transactions, adding that the bank used “complex and counterintuitive overdraft practices and manipulations” that even its employees could not explain to customers.

“Regions leadership knew about and could have discontinued its surprise overdraft fee practices years earlier, but they chose to wait” and pursue other changes that would make up for the lost revenue, the CFPB said Wednesday.

This week’s penalty is not Regions’ first run-in with the CFPB on overdraft violations. The bureau ordered the bank in 2015 to refund $49 million to consumers and pay a $7.5 million penalty for charging customers who didn't opt in to overdraft protection and to those who had been told they would not be charged overdraft fees, the agency said Wednesday.