CFPB: BoA Must Pay $10M for Illegal Garnishments

The Consumer Financial Protection Bureau (CFPB) on Wednesday (May 4) ordered Bank of America to pay $10 million for processing illegal, out-of-state garnishment orders against its customers’ bank accounts, according to an enforcement order.

“Bank of America unlawfully froze customer accounts, charged garnishment fees, garnished funds, and sent payments to creditors based on out-of-state garnishment court orders that should have been processed under the laws and protections of the states where the consumers lived,” the CFPB announcement said.

Bank of America also violated the law by inserting “unfair and unenforceable language into customer contracts that purported to limit customers’ rights to challenge garnishments,” the press release said. BoA must refund or cancel imposed fees from unlawful garnishments, review and reform its system for processing garnishments and pay a $10 million civil penalty, according to the enforcement order.

“Bank of America imposed unlawful garnishment fees and injured its customers by inserting unenforceable clauses into contracts in an attempt to strip legal rights from families,” said CFPB Director Rohit Chopra in the announcement. “The CFPB is ordering Bank of America to fix its systems, clean up its contracts and make its victims whole.”

Bank of America unlawfully garnished at least 3,700 out-of-state accounts since August 2011, with the customers whose accounts were garnished having paid at least $592,000 in garnishment fees.

The CFPB ruled that Bank of America engaged in “unfair and deceptive acts and practices that resulted in money from customers’ bank accounts being frozen or taken when the garnishments were not permissible under the state laws where the accounts were located,” according to the press release.

It also said BoA harmed consumers by deceiving customers about their rights, imposing unenforceable clauses in take-it-or-leave-it customer contracts and failing to adhere to consumer protections governing customers’ bank accounts.

Related: CFPB Opens Inquiry Against ‘Junk Fees’

In January, the CFPB launched an initiative to reduce “junk fees,” a move the agency said will save consumers billions of dollars each year. The agency said its research uncovered numerous areas where back-end fees might conceal the true cost of a product.