CFPB orders TCF to refund consumers for overdraft charges

TCF Financial has agreed to pay a $5 million fine to two regulators and provide $25 million in restitution for the way the bank marketed and charged consumers for overdraft protection.

The Consumer Financial Protection Bureau sued the $21 billion-asset TCF, based in Wayzata, Minn., last year, alleging the bank had engaged in deceptive and abusive practices. TCF obscured its overdraft fees and made it appear to customers that the fees were mandatory for opening new checking accounts, the CFPB said Friday.

The overdraft charges occurred from mid-2010 to 2013 when the bank was implementing changes to Regulation E, which requires banks to obtain consent from consumers before charging overdraft fees on one-time debit purchases and ATM withdrawals, the CFPB said.

The CFPB said it had imposed a $5 million civil penalty but adjusted that downward to account for a separate $3 million penalty imposed by the Office of the Comptroller of the Currency, which did not publicly disclose its enforcement action against the bank.

In January 2017, the CFPB held a conference call with reporters to announce the lawsuit and at that time Chris D'Angelo, the bureau's associate director for supervision, enforcement and fair lending, said that "hundreds of thousands of consumers" were overcharged.

The 15-page consent order, filed Friday in the U.S. District Court for the District of Minnesota, requires that TCF come up with a methodology for effectively identifying and providing restitution to customers, including the dollar amount for each affected consumer. The bank has to locate former customers and take reasonable steps to find them.

TCF did not deny or admit wrongdoing.

The company said in a statement that it was "pleased" to reach the settlement and did so "to avoid continuing a protracted and expensive lawsuit."

"We believe that we have thoroughly addressed these issues and that our disclosures comply with all laws and regulations," TCF said. “We always strive to treat our customers with integrity and fairness and deliver a quality banking experience that addresses their evolving needs and complies with all applicable laws and regulations."

TCF said that the OCC's consent order stated that the bank had "complied with the technical requirements of Regulation E," which had been the Federal Reserve's "opt-in" rules on overdraft that went into effect in 2010.

TCF said it is currently working with the CFPB and the OCC to determine how the $25 million in restitution will be distributed to eligible current and former account holders. A restitution plan will be approved by the regulators in the fall, the bank said, with payments going out by the end of 2018.