Bank of America (BoA) was fined $150 million by US regulators for double charging overdraft fees and opening unauthorized accounts. The US central bank assessed banks’ resilience to recession, but did not consider their ability to withstand real-world challenges.
America’s banking crisis is far from over, with some of the country’s biggest banks stuck in deep water. Bank of America has been in the spotlight recently for bond market paper losses, overcharging customers and opening doubtful accounts.
On July 11, it was reported that US financial regulators had fined Bank of America $150 million.
Bank of America, The Second Largest Bank in the United States
According to the New York Times, America’s second-largest bank has been charging double overdraft fees, withholding card benefits and opening unauthorized accounts.
Banking regulators, the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB) fined the bank $150 million for what they called “junk fees.”
Better Banking Options tweeted the following on July 12:
“The Consumer Financial Protection Bureau just ordered Bank of America to pay $150 million in penalties to federal agencies and $100 to harmed consumers for their unethical business practices. This is typical form for the mega banks.”
Some customers reportedly paid overdraft fees multiple times for the same transaction. In addition, the bank secretly opened fake accounts in the clients’ names without their knowledge or consent, a widespread practice to meet sales goals.
Wells Fargo underwent years of investigations by federal and state authorities, resulting in billions of dollars in fines for fake accounts. The bank was also found to be circumventing sign-up bonuses it promised customers for opening new card accounts.
Following the action, Bank of America will reimburse $80 million to customers affected by its malpractices. The director of the consumer bureau, Rohit Chopra, commented that “These practices are illegal and undermine customer trust. The CFPB will end these practices throughout the banking system.”
Bank of America was in the spotlight earlier this month when reports surfaced that it had more than $100 billion in paper losses from the bond market.
Inadequate Fed Stress Test
The bank, which manages $2.5 trillion in total assets, could be forced to sell these bonds at a loss if depositors want their money. This could lead to a situation similar to that of Silicon Valley Bank, which collapsed in March.
NYT Politics tweeted on July 12 that the BoA “secretly opened card accounts in customers’ names, double-charged overdraft fees and withheld promised perks from some of its credit card users, federal regulators said. It will repay customers more than $80 million.”
While BoA’s paper losses were higher, other big US banks were facing the same problem. JPMorgan has $37 billion in paper losses and Wells Fargo has $42 billion.
The investigation establishes that Citi and Morgan Stanley have lost a combined total of $34 billion.
In late June, the US central bank conducted a recession stress test on some of the country’s largest banks. According to the Washington Post, the Federal Reserve approved all of them, but did not assess the banks’ ability to withstand real-world challenges.
In addition, the Federal Reserve’s bank rescue fund (Bank Term Funding Program) is at an all-time high of more than 100 billion dollars. In March, the fund was set up to allow struggling lenders to borrow more money.
By Audy Castaneda
