TCF Sued By CFPB Over Overdraft Fees

TCF National Bank is getting sued by the Consumer Financial Protection Bureau (CFPB), which contends that the bank tricked consumers into overdraft services that were very costly.

In a press release announcing the action, the government watchdog said banks aren’t allowed to charge overdraft fees on one-time debit purchases and ATM withdrawals without getting the consent of consumers but that TCF created its application process in a way that obscures the fees and makes an overdraft appear to be something that is mandatory. The CFPB also contends TCF embraced a “loose” definition of consent for their existing customers to opt them into the overdraft service. Customers who questioned the process reportedly received push-back from the bank.

“Today we are suing TCF for tricking consumers into costly overdraft services in order to preserve its bottom line,” said CFPB Director Richard Cordray in a press release announcing the lawsuit. “TCF bulldozed its way through protections against automatic overdraft enrollment and then celebrated its unusual sign-up success. With today’s action, we are standing up for consumers’ right to understand and choose what services they receive.”

According to the complaint, TCF relied on overdraft fee revenue more so than other banks its size and realized early on that the opt-in rule for overdrafts could hurt the business with $182 million in annual revenue at risk in 2009. As a result, it started consumer testing in 2009 and determined that the less information given to customers, the more likely they were to opt in for the costly service. The CFPB also claims TCF gave bonuses to branch staffers who got customers to sign up for overdraft services. By the middle of 2014, about 66 percent of the bank’s customers had opted in, which is at a rate that is triple compared to other banks. The CFPB said the CEO of TCF even went as far as to name his boat Overdraft. The CFPB charged the bank with violating the Electronic Fund Transfer Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.