The Consumer Financial Protection Bureau on July 11 fined Bank of America for three types of transgressions against its customers, each costing consumers money and time. We've seen similar transgressions at many other banks over the years, and we are likely to see more in the future.
Here are a few simple steps consumers can take to help them avoid being victimized by their banks.
The first BofA transgression cited by the CFPB involved non-sufficient funds (NSF) fees. An NSF fee occurs when there's not enough in an account to cover a transaction. Banks will typically decline a transaction because of insufficient funds and charge the customer an NSF fee. The problem with what BofA did wasn't that it charged an NSF fee, but that is charged multiple NSF fees for the same transaction. BofA's NSF fee was $35. When this charge was unfairly applied multiple times, the total fee amount quickly rose to a burdensome level.
NSF charges and overdraft charges — the fee applied when an account is overdrawn and the bank covers the transaction charge on the customer's behalf — are common fees at banks. The good news is that many banks, including BofA, have made their NSF/overdraft fee policies more consumer friendly in the last few years. So if you make a mistake by not having enough in your account to cover a transaction, the fees shouldn't be as costly as what BofA customers experienced. Nevertheless, NSF/overdraft fees can still be costly, and it's important to avoid them.
To avoid NSF/overdraft fees, set up low-balance alerts. Most banks now have mobile apps which can notify you when your balance falls below a certain threshold. Also, many banks offer free overdraft transfers. With overdraft transfers, a transaction that overdraws your checking account will trigger a transfer from your savings account to your checking account to cover the transaction.
The second BofA transgression cited by the CFPB was the withholding of promised credit card account bonuses. According to the CFPB, BofA "failed to honor rewards promises for consumers who submitted in-person or over-the-phone applications." This is another common problem at banks. Bank bonus offers have requirements that customers must satisfy to qualify for the bonus. Sometimes, it's the customers who fail to qualify for the bonus. Other times, the customers properly satisfy the requirements, and the bank wrongly claims that the requirements were not met.
If you participate in any new account bonus offer, make sure to carefully review the terms of the promotion and the requirements to qualify for the bonus. Also, make a copy of the terms and requirements for future reference. As you apply for the account and complete the bonus requirements, document the dates and records that show completion. If you don't receive the bonus in the timeframe that it was promised, call the bank and cite your records that show you've completed the requirements.
The third BofA transgression cited by the CFPB was the opening of credit card accounts without customers' knowledge or authorization. As the CFPB described, "consumers were charged unjustified fees, suffered negative effects to their credit profiles, and had to spend time correcting errors." The unauthorized opening of accounts was the root of the Wells Fargo scandal in previous years.
To protect yourself against unauthorized account openings, regularly check your credit reports from each of the three credit bureaus. This can be done for free once a year (it's free once a week through 2023). The credit report will show all credit accounts that have been opened. Make sure all of the listed accounts and credit inquiries are valid. Any unauthorized inquiries and account openings should be reported. To simplify the monitoring, use a free credit-monitoring service. These services can alert you when your credit report is being checked.
In addition to requesting a copy of your credit report, you should also request a copy of your ChexSystems report, once a year. This is also free. Most banks use ChexSystems as part of the application process for opening a checking account. A ChexSystems report can help you spot if a checking account has been opened in your name without your authorization.
If your bank charges an abusive fee, fails to honor a bonus payout, or opens an account without your authorization, your first step should be to contact the bank to correct the situation. If your bank refuses to help, file a complaint with the bank's regulator and the CFPB. As this CFPB action against BofA shows, those complaints can help spur action by regulators to ensure your bank is held accountable.
Ken Tumin is founder of DepositAccounts.com by LendingTree, which has been tracking and rating the savings, CD and checking account offerings of banks and credit unions for more than a decade.
