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TCF Bank Faces CFPB Lawsuit for Allegedly ‘Tricking’ Consumers into Overdraft Service

The CFPB is maintaining its laser-like focus on fee disclosures. TCF National Bank is the latest to be caught in the agency’s sights for allegedly “tricking consumers into a costly overdraft service” and not being clear enough with customers about fees, among other purported wrongdoing, according to the CFPB. TCF rejects the assertions.

The CFPB filed a lawsuit Jan. 19 against TCF for violating the Electronic Fund Transfer Act and the Dodd-Frank Act, and is seeking compensation for consumers, injunctive relief and penalties. The CFPB contends that TCF conducted consumer testing that revealed if consumers were asked to opt into an overdraft service while being asked to agree to terms mandatory to open a new account, the opt-in rate more than doubled. The bank also gave employees scripts that didn’t explain that opting in was optional or that it amounted to giving the bank permission to authorize transactions that would result in fees, according to the CFPB. Furthermore, if a consumer didn’t want to opt in, bank employees were told to promote the product by suggesting a hypothetical situation, such as an emergency when they would desperately need access to money, according to the complaint. The bank also ran a campaign among current account holders to opt into the overdraft service using a “vague sales pitch” that didn’t make clear customers’ overdrafts would be covered for a $35 charge, according to the CFPB.

The agency also alleges that TCF employees received bonuses for getting consumers to agree to the overdraft service. For example, managers at larger branches could receive as much as $7,000 in bonuses for getting a high number of opt-ins on new checking accounts. After TCF eliminated bonuses, some regional managers instituted opt-in goals for employees, who had to achieve opt-in rates of at least 80 percent or higher for all new accounts. “TCF’s corporate policy was that there should not be any adverse employment consequences associated with failing to attain any particular opt-in rate. Nevertheless, many employees were led to believe they could lose their jobs if they did not meet sales goals, of which opt-in goals were one component,” according to the complaint.

TCF has rejected the claims made by the CFPB and “strongly believes” its overdraft protection program is a valued customer service, according to an official statement. “For the past several months, we have engaged in discussions with the CFPB in a good faith effort to resolve this matter,” according to the bank. “It is unfortunate that the CFPB has decided to litigate this matter. Although we remain hopeful that we can reach an appropriate resolution, TCF intends to vigorously defend against the CFPB’s complaint. We believe that at all times our overdraft protection program complied with the letter and spirit of all applicable laws and regulations, and that we treated our customers fairly.”

The CFPB’s lawsuit against TCF follows a $23.1 million enforcement action against credit reporting agencies Equifax and TransUnion for allegedly misstating the cost and usefulness of their products. Among other allegations, the credit bureaus failed to “clearly and conspicuously” disclose that customers would automatically be charged a recurring monthly fee after a free trial period of seven or 30 days, unless they canceled during the trial period, according to the bureau.

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