top of page

Bank of America: Colossal Fine Penalization



Bank of America (BoA) has been found guilty of unethical practices undermining customer trust. The bank caters to a vast customer base of 68 million individuals and small businesses and holds approximately 10.73% of all American bank deposits. Its core offerings encompass commercial banking, wealth management, and investment banking. As the second largest bank in the US, Bank of America's misconduct has drawn significant criticism and highlights the importance of maintaining ethical standards in the financial industry. The bank has faced repercussions for engaging in activities such as doubling fees and opening accounts without customer consent. These actions led to customers being charged excessive fees without their knowledge, as well as unauthorized accounts being opened in their names. The bank intentionally opened those accounts in order to help their employees attain their sales incentives goals. Furthermore, the bank illegally withheld its customer's credit card rewards. In response to these several violations, Bank of America has been imposed fines of US$250 million. The bank has been ordered to reimburse customers over US$100 million and pay US$150 million in penalties. The Consumer Financial Protection Bureau (CFPB) is set to be allocated US$90 million in penalties, while the Office of the Comptroller of the Currency (OCC) is expected to receive US$60 million. This significant penalty reflects the severity of the bank's lack of internal controls and oversight, which allowed these unethical practices to persist.


Regulators have determined that the Bank of America has recently breached multiple laws, including the Consumer Financial Protection Act, the Fair Credit Reporting Act, the Truth in Lending Act, and section 5 of the Federal Trade Commission Act. CFPB director Rohit Chopra emphasized the illegal nature of these practices and voiced the agency's unwavering dedication to combat such behavior within the banking system. This penalty is not an isolated incident for the bank, highlighting its status as a repeat offender. Back in 2014, the CFPB ordered the Bank of America to pay a substantial US$727 million in redress to victims affected by their illegal credit card practices. Further evidencing their misconduct, in May 2022, the CFPB imposed a US$10 million civil penalty on the bank for its involvement in unlawful garnishments. The gravity of their wrongdoings was exemplified later that same year when the CFPB and OCC collectively fined Bank of America a staggering US$225 million. Additionally, the bank was required to provide hundreds of millions of dollars in restitution to consumers due to their mishandling of state unemployment benefits during the height of the COVID-19 pandemic. With a pattern of recurrent offenses and substantial financial consequences, the Bank of America finds itself under intensified scrutiny, raising concerns about its adherence to ethical practices and its commitment to protecting consumers, particularly in light of the concerning trend of excessive fees imposed on consumers.


Issues in excessive fees imposed on consumers have become a concerning trend. These fees, commonly known as junk fees, often take customers by surprise with their hidden nature and originate from various lenders. Recognizing the significance of this issue, President Joe Biden and his administration have taken a stance to address the problem of junk fees across various industries. Moreover, the proposed crackdown targets banks, hotels, airlines, and other service providers. The White House has announced that the consumer watchdog is advocating a new rule prohibiting banks from charging surprise overdraft fees on debit transactions. This measure protects consumers from unexpected charges that can quickly add up and strain their finances. Additionally, the proposal aims to reduce the typical late fees, which currently hover around US$30, to a more manageable amount of US$8. All these efforts would then alleviate the burden on consumers who may occasionally miss payment deadlines due to unforeseen circumstances. By lowering late fees, individuals would have a better chance to recover financially and avoid falling into a cycle of debt. If the measure is implemented, it could save consumers a substantial US$ 9 billion annually. The proposed standards aim to alleviate financial strain on individuals and promote fair practices across industries by holding financial institutions and service providers accountable for their fee structures. Overall, addressing junk fees and their hidden nature is important to create a more transparent and consumer-friendly environment. While The US Government sets highly preemptive measures on the case, Bank of America is still on the lookout to address and settle the situation.


Sources:

BBC News

CNBC

NBC News


What would you like to learn next week? Comment, Like, and Share.


259 views0 comments
bottom of page