Bank of America has agreed to pay a $10 million fine to the Consumer Financial Protection Bureau for allegedly processing illegal out-of-state garnishment orders that resulted in at least 3,700 customers paying unlawful fees.
The CFPB said Wednesday that the $2.5 trillion-asset BofA engaged in “unfair and deceptive acts and practices,” by processing orders to garnish money from customer's bank accounts that were not allowed in some states.
Affected customers paid $592,000 in unlawful fees, or roughly $200 per person on average, the bureau said. The CFPB also said BofA tried to limit customers’ rights to challenge the garnishments.
“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,” Rohit Chopra, the director of the bureau, said in a press release. “The CFPB is ordering Bank of America to fix its systems, clean up its contracts, and make its victims whole.”
The CFPB examined the Charlotte, North Carolina-based bank's practices on processing garnishments from mid-2011 to March 2022. During that period, the bank processed 1 million state garnishment orders, typically to collect a debt. BofA pledging to refund the fees and make changes to its systems.
“We have enhanced our processes to ensure compliance with all applicable state laws as we execute court orders,” Bank of America said in a statement. “We will refund associated fees to customers involved in approximately 3,700 cases.”
The CFPB said the bank required customers not to contest garnishment orders. The bank also asked customers to waive liability for its actions on such orders, which prevented customers from pursuing legal claims, the bureau said.
BofA allegedly failed to follow certain state-specific requirements and inaccurately applied exemptions for out-of-state garnishment notices to the issuing state instead of to the state where the consumer lived, according to the CFPB’s 47-page consent
