TD to pay CFPB $28M for giving credit agencies inaccurate data

Dive Brief:

The Consumer Financial Protection Bureau has ordered TD to pay $28 million for sharing inaccurate customer information with credit reporting agencies and failing to investigate customer disputes, which may have affected consumers’ ability to access credit, the agency said Wednesday.
That amount includes $7.76 million in redress to “tens of thousands of consumers affected by its unlawful behavior,” the CFPB said, and a $20 million penalty that will go toward the CFPB’s victims relief fund.
“Long before this settlement, TD self-identified these matters and voluntarily and proactively implemented enhancements to our furnishing and dispute handling practices,” a bank spokesperson said in a statement Wednesday. “TD cooperated fully to resolve this matter and is committed to continuing to deliver on its responsibilities to its customers.”

Dive Insight:

For several years, the Cherry Hill, New Jersey-based subsidiary of Canada’s second-largest bank repeatedly shared inaccurate and negative customer information to consumer reporting companies, the CFPB said in its release.

Information shared included “systemic errors” about credit card delinquencies and bankruptcies, as well as information related to bank accounts, “including accounts the lender knew or suspected were fraudulently opened,” the CFPB said.

The bank was aware of many of the inaccuracies for more than a year before it took action to fix them, the consumer watchdog asserted. In January 2022, TD had identified hundreds of thousands of deposit account openings that were suspected to be fraudulent or had been confirmed as such. But the bank was still sharing fraudulent information with credit reporting agencies 15 months later, the CFPB said.

And when customers or consumer reporting companies submitted disputes to the bank, TD failed to properly conduct investigations or, in some cases, investigate the issues at all, the CFPB said. The bank lacked “sufficient processes” to conduct such investigations, and diverted resources to do so to other areas of the business. The bank also didn’t properly notify consumers after it had labeled a dispute frivolous or irrelevant, the CFPB said.

The bank’s actions violated the Fair Credit Reporting Act and the Consumer Financial Protection Act, the CFPB said.

During the time period the CFPB identified, TD was pursuing a major acquisition: The bank expressed its intent to purchase Memphis, Tennessee-based First Horizon for $13.4 billion in February 2022; the deal was scuttled in May 2023.

“The CFPB’s investigation found that TD Bank illegally threatened the consumer reports of its customers with fraudulent information and then barely lifted a finger to fix it,” the agency’s director, Rohit Chopra, said Wednesday. “Rather than treating its customers fairly and following the law, TD Bank’s management clearly cared more about growth and expanding its empire through mergers.”

Chopra, going a step further, advised: “Regulators will need to focus major attention on TD Bank to change its course.”

TD is facing a major probe into its U.S. anti-money laundering program; the bank has set aside $3.57 billion for expected penalties related to AML matters. The lender expects a “global resolution” on the issue by the end of this year, CEO Bharat Masrani said last month.

TD’s AML woes stem from an alleged scheme through which traffickers used the bank to launder at least $653 million tied to the drug fentanyl and bribed bank employees, The Wall Street Journal has reported. As the bank has sought to quickly address its AML shortcomings, its plans for branch growth in the U.S. have slowed dramatically, the CEO noted this month.

The enforcement action is the agency’s second against TD. The CFPB in 2020 ordered the lender to pay $122 million in penalties and restitution to some 1.42 million consumers related to its overdraft practices.