Today's Trends in Credit Regulation

CFPB Enforces the Overdraft Opt-In Rule
By Katie Hawkins

On April 28, 2015, the Consumer Financial Protection Bureau entered a Consent Order with Regions Bank ("Regions") resulting from the CFPB's first enforcement action related to overdraft fees. Regions, one of the country's biggest banks, is headquartered in Birmingham, Alabama and has approximately 1,700 branches and 2,000 ATMs across 16 states. In the Consent Order, the CFPB alleged that Regions violated the Electronic Fund Transfer Act ("EFTA") and its implementing regulation, Regulation E, by charging overdraft fees to consumers who did not opt in to Regions' overdraft program. Regions neither admitted nor denied the allegations.

Section 1005.17 of Regulation E prohibits depository institutions from charging overdraft fees on ATM and one-time debit card transactions unless a consumer has affirmatively opted in to an overdraft protection service or program. This rule became effective in July 2010 for new consumer customers and August 2010 for existing consumer customers.

The CFPB alleged that Regions charged overdraft fees to consumers who had not opted in for overdraft coverage and charged overdraft and non-sufficient fund fees where the collection of payment for Regions' deposit advance product caused a consumer's checking account balance to become negative. In materials for the deposit advance product, Regions represented that overdraft and non-sufficient funds fees would not be charged under such circumstances. The Consent Order states that because of those representations by Regions, charging overdraft fees under such circumstances constituted a deceptive act or practice. The Consent Order further states that the non-sufficient funds fees related to the deposit advance product were a programming error and Regions refunded $1.9 million to affected consumers.

In May 2012, Regions reported the problems to the CFPB. Beginning in December 2012, Regions repaid approximately $49 million to more than 200,000 consumers. Regions also made systems changes to ensure that this problem was fixed. In prepared remarks, the CFPB noted that because of Regions' prompt self-reporting and voluntary refunding to consumers, the penalties required in the Consent Order were not as stiff as they may have been otherwise.

The Consent Order requires Regions to pay a $7.5 million civil money penalty in addition to refunding any consumer who was charged unlawful overdraft fees and has not yet received a refund. Further, Regions is required to hire an independent consultant to identify any affected consumers who have not yet been identified by or reimbursed by Regions. Finally, Regions must identify and correct any instances of negative credit reporting resulting from the unlawful fees.

Although this is the CFPB's first enforcement action related to overdraft fees, there are indications, including the CFPB's Winter 2015 Supervisory Highlights publication, that this is part of a broader focus on overdraft fees, and potential rules related to overdraft fees are on the horizon.

Katie Hawkins is an associate in the Portland, Maine office of Hudson Cook, LLP. Katie can be reached at 207-210-6836 or by email at

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