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Regions Fined $191 Million Over ‘Surprise Overdraft Fees’ (1)

Sept. 28, 2022, 3:42 PM

Regions Financial Corp. will pay $191 million in penalties over allegations by US consumer watchdogs that it charged clients illegal overdraft fees for almost three years.

The Consumer Financial Protection Bureau said Wednesday that Regions charged clients “surprise” overdraft fees from August 2018 until July 2021. The bank, according to the CFPB, penalized the customers on some ATM withdrawals and debit card purchases even after telling them that they had sufficient funds when the transactions occurred.

In a statement, the CFPB called Regions a “repeat offender” and said the firm had agreed to pay $50 million to the agency and to refund at least $141 million to customers. Regions said in a separate statement that it “disagrees” with the CFPB’s characterizations but cooperated with the investigation. The bank didn’t admit or deny the allegations.

Read more about the ‘Free’ checking accounts that cost consumers over $8 billion

“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.

The fine comes amid heightened scrutiny by federal officials and executives of the negative impacts overdraft fees have on consumers, particularly low-income ones. Data shows that charges leveled against customers who overdraft again and again serve to subsidize the so-called “free” checking accounts enjoyed by many Americans.

Most major US banks, including Regions, have moved in the past few years to overhaul their overdraft model. Citigroup Inc. opted to do away with the charges entirely.

Read more: Bank Executives Steer Clear of No-Overdraft Pledge in Testimony

Morgan Stanley wrote in a note last year that regional lenders were more reliant than their Wall Street counterparts on the charges, with consumer overdraft fees accounting for almost 5% of Regions 2020 revenue.

(Updates with Regions comment, details on overdraft fees starting in the third paragraph.)

To contact the reporter on this story:
Max Reyes in New York at mreyes125@bloomberg.net

To contact the editors responsible for this story:
Ben Bain at bbain2@bloomberg.net

Sally Bakewell

© 2022 Bloomberg L.P. All rights reserved. Used with permission.