Regions Bank must pay $141 million to customers over illegal overdraft

Regions Bank was found to have charged illegal overdraft fees for the second time in a decade, the government said Wednesday, in a settlement that will require the bank to refund $141 million to customers and pay an additional $50 million in fees.

During the investigation by the Consumer Financial Protection Bureau found that between 2018 and 2021, Regions charged overdraft fees on certain ATM withdrawals and certain debit card purchases, even after the Alabama-based bank told customers they had enough funds to account to cover transactions.

The CFPB also found that Regions executives were aware of the error in their systems but delayed making adjustments to their practices until the bank could find ways to make up for the revenue lost from the fees. The agency said overdraft and insufficient funds fees — otherwise known as check bounce fees — accounted for about 18% of the bank’s non-interest income in 2019.

“Regions Bank received tens of millions of dollars in unexpected overdraft fees each year, even after its own employees warned that the bank’s practices were illegal,” Rohit Chopra, the agency’s director, said in a statement. “All too often, large financial firms make the calculation that it is more profitable to continue to break the law than to follow it. We need to do more work to change this mentality.”

Regions said in a statement that while it disagreed with the bureau’s assessment of their business practices, it was happy to put the settlement behind it.

“Over a year ago, Regions stopped charging overdraft fees,” said Regions Chief Legal Officer Tara Plimpton. “We launched this promotion as part of a broader series of improvements … (which) include updating the bank’s placement orders and transaction processing to give customers a clearer view of the money they have available for purchases while avoiding fees.”

Earning income

This is not the first time that “Regions” have been fined for the practice of overdraft. In 2015, the bureau ordered Regions must repay $49 million and pay a $7.5 million overdraft penalty. Customers in these regions were charged an overdraft fee if they opted out of the service.

Under President Biden, the CFPB, which was created after the 2008 financial crisis to protect consumers from financial abuse, took a dim view of heavy overdraft fees. Earlier this year, the agency said consumers are paying at least $29 billion annually in what he describes as excessive fees.

During the pandemic, the average overpayment fee is the cost was $33.58, according to Bankrate. In recent years, major U.S. banks have received about $9 billion annually from overdraft, ATM and other fees, according to Center for responsible lending.

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