Why banks are trying to make a business out of junk fees

Bank of America, the second largest bank in the country, will give $100 million back to customers and pay steep fines for double-dipping on fees and opening accounts without permission. Rohit Chopra is director of the Consumer Financial Protection Bureau, one of the regulatory agencies that’s slapped these penalties on Bank of America. He spoke with Marketplace’s David Brancaccio on the day the news came out. The following is an edited transcript of their conversation.

David Brancaccio: So in the case of the overdraft fees, a customer tries to take out more money than they have, that’s not allowed, and there’s a fee. But they may have ended up paying a fee more than one time for that one withdrawal?

Rohit Chopra: That’s right. We found that banks are charging all sorts of fees to customers who may not have enough money in their account. And there’s all sorts of ways they generate more of these fees. Some of it involves reordering payment transactions, so that people might think they have enough money, but once it’s reordered, they pay even more. In this case, we found that a single transaction might lead to multiple fees, because of the way they set up their systems.

Brancaccio: Another piece of this was opening accounts without customers’ permission. I mean, is this about fine print on approval forms, or were accounts open, the customers had no intention of opening?

Chopra: It’s more of the latter. I think what we have found across a number of banks is pressure cooker sales goals pushed on employees. This was, of course, most famously discovered at Wells Fargo about a decade ago, leading to so many illegal applications and enrolling consumers in accounts that they never wanted and without their knowledge. We identified this occurring at Bank of America, and I’ve ordered them to clean up these practices, and they will be suspending their sales goals that lead to these fake accounts.

Brancaccio: For people who have or had Bank of America accounts, what’s the process? Do customers have to figure out where they’ve been dinged and then prove it?

Chopra: So consumers do not need to do anything to get these refunds. And in many cases, those refunds have already started. We identified illegal activity in Bank of America’s credit card business where they withheld rewards in the form of cash. Those are all going to happen automatically. The CFPB, though, is not going to take Bank of America’s word for it — we will be closely supervising the remediation process.

Brancaccio: Bank of America’s got a statement out saying they’ve gotten better about these practices. (They said,) “We voluntarily reduced overdraft fees and eliminated all non sufficient fund fees in the first half of 2022.” I suppose that’s progress.

Chopra: What I share with many bank CEOs is that laws are not suggestions for them. These are not something that small banks or individuals can just shrug and ignore. Bank of America was operating many of its businesses illegally, and we are forcing them to change that. It is good that banks are suspending some of their junk fee practices. But there’s more to do to make sure that consumers are being treated fairly.