By Jason Jenkins
The Consumer Financial Protection Bureau, an agency charged with overseeing the federal financial laws that protect consumers, has sued Wayzata-based TCF National Bank for allegedly deceiving customers so it could charge the customers costly overdraft fees.
In its complaint, the bureau alleges that TCF’s practices have violated the Electronic Fund Transfer Act and the Consumer Financial Protection Act of 2010. The regulations include an “opt-in” rule prohibiting banks from charging overdraft fees on ATM and one-time debit card transactions unless the account-holder has previously opted in or consented to overdraft coverage for those transactions.
The lawsuit claims the federal “opt-in” rule put $182 million in annual fee revenue at risk for TCF.
TCF issued a statement rejecting the claims, calling the overdraft protection program a “valued product” for customers.
“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,” TCF’s statement said.
The banking institution said that while it remains hopeful an appropriate resolution can be met, it intends to “vigorously defend against the CFPB’s complaint.”
The civil lawsuit filed Jan. 19 alleges that TCF pushed overdraft services, at a rate of $35 to cover each overdraft transaction, while new federal rules prohibited overdraft fees for certain debit-card and ATM transactions unless customers agreed to the fees.
“We believe TCF trained its employees to use unlawful tactics in their marketing to consumers. They made overdraft seem mandatory when it was not. They obscured information about fees when opening accounts for new customers. They adopted a loose definition of ‘consent’ to opt in existing customers, and they pushed back aggressively against any customer who questioned the process,” CFPB Director Richard Cordray said in prepared remarks.
The bureau also claims that the bank directed its employees to use prepared scripts and “deceitful” language to secure opt-ins for the overdraft services.
Through April 2014, the bank had persuaded approximately 66 percent of its customers – more than triple the average opt-in rate at other banks – to opt in to overdraft service for debit card and ATM transactions and collected overdraft fees from hundreds of thousands of its customers, the lawsuit states.
The lawsuit also notes that William Cooper, who retired as TCF’s chief executive at the end of 2015, had named his boat the “Overdraft.”
TCF said the claims from the federal agency mischaracterize the company’s opt-in practices and disclosures, which TCF believes “clearly informed customers about their choice before, during, and after they made their opt-in decision.”
In its statement, the banking institution also contends that the bureau’s allegations that the verbal presentations of TCF employees misled customers are contradicted by two facts: That customers who opened accounts online between 2010 and 2016, with no face-to-face interaction with bank employees, opted in to overdraft protection at a consistent rate of more than 60 percent, and that there were only 341 complaints out of 2.6 million customers from 2010 to 2015 related to their decision to opt-in.
The lawsuit “seeks redress to make consumers whole, injunctive relief to stop these unlawful practices, and civil money penalties as deemed appropriate,” Cordray said.
TCF operates a network of around 360 retail branch offices in Arizona, Colorado Illinois, Michigan, Minnesota, Wisconsin and South Dakota.