Bank of America ordered to pay $250 million for fake accounts, junk fees and withheld credit-card rewards

By Steve Gelsi

Wells Fargo paid out billions for similar practices

The Consumer Financial Protection Bureau said Tuesday that Bank of America Corp. would pay a total of $250 million for illegally charging junk fees, withholding credit-card rewards and opening fake accounts.

The bank (BAC) will pay more than $100 million to consumers who were harmed by these activities. The Office of the Comptroller of the Currency said the bank's "double-dipping on fees" was illegal.

Bank of America will pay penalties of $90 million to the CFPB and $60 million to the OCC.

"Bank of America wrongfully withheld credit card rewards, double-dipped on fees, and opened accounts without consent," said CFPB Director Rohit Chopra. "These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system."

A Bank of America spokesperson said: "We voluntarily reduced overdraft fees and eliminated all nonsufficient-fund fees in the first half of 2022. As a result of these industry-leading changes, revenue from these fees has dropped more than 90%."

The spokesperson was referring to a Jan. 11, 2022, announcement about Bank of America reducing its overdraft fees and eliminating nonsufficient-fund fees.

Bank of America's stock was up 1% in regular trades.

The moves come amid a crackdown by the Biden administration against junk fees.

In December, Wells Fargo & Co. (WFC)agreed to pay $3.7 billion for wrongdoing and mismanagement, including more than than $2 billion in redress to consumers.

The CFPB said that Wells Fargo had harmed millions of people through wrongful car repossessions, improper denials of mortgage-loan modifications and surprise overdraft fees that were charged to consumers who in fact had enough funds in their accounts at the time of their transactions.

Eric Schiffer, the chair of the Patriarch Organization, a private-equity firm, said the transgressions by Bank of America appear to be more contained than those of Wells Fargo, but that the bank's reputation with consumers with be hurt.

"It's a wake-up call for all financial firms to make sure their compliance is in place to protect your most valuable asset you have, which is the relationship with your customers," Schiffer said. "Cutting fees is a distraction to balance the hit Bank of America just got on trust. The backdrop is consumers are still skeptical about banks because of a pattern of scams like Wells Fargo or banks not having enough assets to cover withdrawals like what happened at SVB [Silicon Valley Bank]."

Separately on Tuesday, William F. Galvin, secretary of the Commonwealth of Massachusetts, ordered Raymond James Financial Services Inc. (RJF) to return $8.25 million plus interest to customers who were charged "unreasonably high fees" as part of a settlement, according to a statement.

He also ordered Raymond James to pay $4.2 million in fines and penalties to the six states involved in the probe of the financial firm.

Galvin said an investigation revealed that the broker-dealer had levied "unreasonable commissions" on more than 270,000 equity transactions since 2018.

The broker had applied a $75 minimum commission regardless of the "reasonableness" of the commission. Raymond James's stock was up 0.6% in recent trades.

From the archives (December 2022): Wells Fargo ordered to pay $3.7 billion for alleged mismanagement of auto loans, mortgages and deposit accounts

-Steve Gelsi

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07-12-23 0801ET

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