Case Regulatory Authority

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UDAAP Cases and Enforcement Actions


Regulatory Authority

Product / Practice



Overdraft Protection

Woodforest Bank

OTS 10-018

OTS 18047

OCC 2010-202


OTS – 4/23/10

OCC – 10/1/10


Overdraft fees deemed unfair and deceptive; loans originated that had low probability of repayment
• Lack of oversight of ODP programs;

• Fees generated were significant portion of

bank’s revenue;

Bank paid penalties of $400k and agreed to reimburse affected customers $12m. Bank ordered to redesign its ODP plans.1

Gutierrez v. Wells Fargo

C 07-5923 WHA. (N.D. Cal.)

Civil Lawsuit; Class Action
Note: The case has been in litigation since 2008. Around the time of the decertification of the class, there was a settlement however it is now on appeal.
Filed – 4/17/08

Decert – 5/5/09

Appeal – 11/29/10




Balance disclosures and overdraft fees. Posting transactions from high to low.

• Certain debit card transactions are at first

reflected in an available balance, but then

later deleted from the available balance,

thereby misleading customers with inflated

account balance information and inducing

them to incur overdraft fees.

• The bank commingled debit card

transactions with check and ACH

transactions for posting purposes.

• The bank also adopted a practice it referred

to as the “shadow line,” which was an

informal line of credit to support debit card

transactions. The amount of the shadow

line was individually underwritten. The bank

did not provide notice of this practice to its


The case eventually settled for $203m, however, the court found that the bank’s consumer account agreement did not adequately disclose posting practices.
According to the court, the bank’s marketing materials suggested that debit card transactions would be posted in chronological order. One of the bank’s marketing themes was that debit card purchase transactions would be “immediately” or “automatically” deducted from the account. Use of these terms, in view of the court, lead consumers to believe that the funds would be deducted from their checking account in the order transacted, and that the purchase would not be approved if they lacked sufficient available funds to cover the transaction.
The court noted that overdraft fees were the second highest source of revenue for the bank.

In the Matter of Greenbank, Greenville, Tennessee


FDIC – 8/4/11


• Violations of UDAP and Section 5 of FTC Act

• Marketing and implementation of overdraft

protection program.

Consent Order –

Bank ordered to pay the US Treasury $132k.

Mathena v. Webster Bank

Civil Lawsuit (class action)
Settled - 3/28/11


UDAP practices alleged in connection with overdraft program. Bank manipulated debits in a way that maximized overdraft fees.

  • Debit transactions posted from highest dollar amounts to lowest.

$3m settlement.

East Boston Savings Bank


FDIC – 10/25/11


Overdraft program

• Practices were unfair and deceptive,

Violations of Section 5 of FTC Act.

Consent Order –

Bank ordered to reimburse affected customers.

Buffington v. SunTrust Banks

1:09 CV 23632

Civil Lawsuit

(class action)



Underlying action based on overdraft fees which plaintiffs claim are not allowed per the deposit agreement. Allegations include:

  • Deceptive processing of transactions.

  • Buffingtons charged more than $4k in overdraft fees.

US Supreme Court denied to hear the case and it will go into mandatory arbitration. Note that a key point of the case is the mandatory arbitration clause being “unconscionable” due to its take it or leave it nature. The Appeals Court sided with SunTrust.
Final outcome based on arbitration to be determined.

Hough v. Regions Financial Corporation, Regions Bank

1:10 CV 20476

Civil Lawsuit

(class action)



Similar to the Buffington case, this involves overdraft litigation and has the “mandatory arbitration” component. Underlying action based on overdraft fees which plaintiffs claim were contrary to the deposit agreement. Allegation include:

  • Breach of duty of good faith and fair dealing.

  • Unfair levying of overdraft charges.

  • Deceptively processing transactions in order to maximize overdraft fees.

  • ODP fees were “usurious.”

US Supreme Court denied to hear the case and it will go into mandatory arbitration. Final outcome based on arbitration to be determined.


OCC – April 2012


BankAtlantic was cited by the OCC for material violations of section 5 of the FTC Act (unfair and deceptive practices) and OTS advertising regulations in connection with its ODP program. Deceptive actions included:

  • Automatic enrollment of customers in the AOP program without disclosing material facts;

  • Marketing checking and savings accounts as “free” and having low cost features while omitting material information; and

  • Suspending customers’ enrollment in the AOP program and reinstating enrollment in the program after the accounts returned to a positive balance, without disclosing the suspension or the reinstatement status of accounts to customers.

Resulted in downgraded CRA and compliance ratings. Bank ordered to establish limits on aggregate overdraft fees as it related to consumers who frequently overdraw their accounts.

Deposit Product Disclosures

Bank of Wolcott

FDIC – 6/25/12

Disclosures; Reg. E

Violations of section 5 of FTC Act (unfair and deceptive practices) in connective with deceptive practices that contradicted the bank’s disclosed practices. Although the disclosed practices were compliant with Reg. E, the actual practices were found to be more burdensome.

CMPs of $15k.

DBC Financial

FTC – 2/4/00

Reg. E; marketing; ODP fees; other fees

Deceptive bank card promotion to Social Security recipients. Public benefits recipients mislead regarding electronic transfers to bank accounts.

  • ATM card marketed as having “no up-front fees” (however, there were account “set up” fees and monthly service fees).

  • Free overdraft protection of $1000 per year marketed, however, there was an ODP fee of $19.95 per month for any month overdrafts incurred;

$250k settlement


FDIC – 9/9/11

Reg. E; disclosures

Error resolution violations constituted UDAAP issues. Although Reg. E policy previously reviewed by FDIC without problems, in a subsequent exam UDAAP issues were found to exist.
Bank procedures for the resolution of errors involving the automated teller machines and/or debit cards, and payment transactions serviced through its automated clearing house that were contrary to the Bank’s disclosures concerning error resolution for these products, in violation of Regulation E.

$82.5k fine.

United Citizens Bank of Southern Kentucky

FDIC – 2/19/13

Reg. E; disclosures

EFT disclosures were deemed deceptive as bank actually administered more burdensome practices. The administered practices were contrary to Reg. E.

CMP $15k

Citizens Bank of Philadelphia




Overdraft Protection

Section 5 of the FTC Act; UDAP related to

deceptive marketing and implementation of ODP, checking rewards, and stop-payment process for preauthorized recurring EFTs.

Restitution Plan to address harm to customers;
CMP $5m
Independent auditor to oversee restitution plan

RBS Citizens of Rhode Island
OCC AA-EC-2013-12


Overdraft Protection

Section 5 of the FTC Act; UDAP related to

deceptive marketing and implementation of ODP, checking rewards, and stop-payment process for preauthorized recurring EFTs.

On an ad hoc basis, to Bank allowed customers to opt out of Standard ODP, but did not disclose technical limitations of the opt-out that prevented it from being effective for all transactions. Customers who opted out of Standard ODP were charged overdraft fees as a result of this practice.
The written customer agreement for Savings Account Overdraft Protection did not disclose that the Bank would not transfer funds from a savings account to cover overdrafts in a linked checking account if the savings account did not have funds to cover the entire overdrawn balance on a given day, even if the available funds would have covered one or more overdrawn items. Certain consumers were charged overdraft fees as a result of available savings funds not being transferred.
The Bank’s Personal Deposit Account Agreement stated that the Bank would stop preauthorized recurring EFTs at the consumer's request, if notice was given at least three business days before the scheduled payment. Due to technical limitations not disclosed to consumers, the Bank was unable to process stop payments between at least January 1, 2008 and August 1, 2010. As a result, some customers were charged overdraft fees despite requesting that certain EFTs cease.
The checking reward program disclosures stated that its customers who have at least ten eligible account transactions in a month would receive rebates, without disclosing posting date requirements for those transactions. As a result, some consumers did not receive anticipated rewards.

Cease and Desist Order:
The Bank must establish a Compliance Committee to oversee remediation of the consent order.
The Bank must develop a Comprehensive Action Plan to address issues in the Order.
Bank must update policies and procedures.
Bank must update compliance risk management systems to ensure compliance with UDAP, all applicable consumer protection laws, rules and regulations, including Section 5 of the FTC Act.
The Bank shall make full restitution and remediation to consumers adversely affected.

Credit Cards and Debit Cards

Capital One

CFPB – 7/16/12

OCC – 7/18/12

Credit Card add-ons; payment protection; unfair billing

Call center vendors engaged in deceptive tactics to sell credit card add-on products including payment protection and credit monitoring. The products were geared toward those with low credit scores and they were solicited when they called in to activate a new card.
• Products had a deceptive nature;

• Misled about eligibility;

• Misinformed about cost of products; and

• Enrolled customers without consent.

• Unfair billing practices (OCC only)
Card holders will receive a refund of associated finance charges, over limit fees resulting from the products and those whose payment protection plans were denied will be paid for claims.

CFPB - Bank reached settlement of $140m to be repaid to customers. May also have to pay a $25m penalty.
OCC – Restitution of $150m (which includes $140m CFPB). Separate restitution orders will ensue for customers harmed by unfair billing practices. $35m civil penalty.
Additionally, Capital One must implement an enterprise risk management program to detect and prevent unfair and deceptive practices.

Powers v. Santander Consumer USA, Inc.

Civil Action – 4:12 CV 11932


Late fees; credit card and debit cards; auto loan payments

Santander is accused of assessing late fees to consumers who had not actually fallen behind on payments.
Details developing.

To be determined.

Salazar v. Capital One


Civil Lawsuit (class action)


Credit card add-ons; payment protection

Unfair and deceptive practices regarding payment protection plan and subprime credit card marketing.

• Payment protection program would cover

payments in event of short-term disability

or unemployment.

• Product terms not adequately disclosed;

• Thousands paid for plan and received no


• Bank signed up thousands who were

ineligible for the program due to being


• Bank increased its fee income through this


Monterey County Bank

FDIC – 9/29/10

Debit card, credit card program features; marketing

Violations of UDAP, Section 5 of the FTC Act and the FDCPA

• Balance transfer and debit card program

deemed unfair, deceptive

• The Balance Transfer Card was marketed to

consumers with bad credit as an

opportunity to pay down old debts and

obtain credit cards.

• Lack of disclosure for consumers to make an

informed decision.

Bank failed to adequately disclose all fees

and charges assessed in connection with

product, which was marketed by a third


Consent order – Bank will pay $2m in restitution to affected customers. Bank will also donate $300k to consumer financial education and counseling.

In the Matter of World’s Foremost Bank

FDIC – 3/8/11

Credit card over-limit-fees; late fees; debt collection

Deceptive practices and violations of Section 5 of the FTC Act

  • A second over-limit fee (OL) was charged on first day of billing cycle when cardholder exceeded credit limits during prior billing cycle.

  • Cardholders contacted at places of employment for debt collection.

  • Practice of establishing minimum monthly payment so low it causes OL fees.

  • Practice of assessing late fees when payments due on Sunday/holiday and payment posted next business day.

Consent order and order to pay – Overhaul of bank’s compliance management system, management and board review of all new products, training, etc. Restitution and CMPs of $250k.

CompuCredit (an affiliate of Columbus Bank and Trust Company)

FDIC – 6/10/08

FTC – 12/19/08

Credit card lending; deceptive marketing

CompuCredit offered subprime credit cards through FDIC-supervised banks. Violations of Section 5 of the FTC Act.

  • Credit card solicitations did not properly disclose credit limits and fees.

  • Important information disclosed on different pages, resulting in confusion.

  • Cards marketed to those with low FICO scores.

  • Amount of available credit misrepresented ($300 advertised limit; however after fees assessed, actual limit was $185).

Banks involved included First Bank of Delaware, First Bank & Trust of Brookings, SD and Columbus Bank & Trust Company

$114m settlement and CMPs of $2.4m

Higher One, Inc.

Bancorp Bank

FDIC – 8/8/12

Debit card; overdrafts and NSF fees

Higher One is an affiliated entity of Bancorp Bank. Both parties agreed to consent orders and restitution to 60,000 students.
Student debit card program (OneAccount) violated section 5 of FTC Act.

• Student account holders charged multiple

NSF fees from a single transaction.

• Accounts remained in overdrawn status for

long periods, allowing NSF fees to continue


• Fees were collected from subsequent



$11m restitution to be paid to students.

CMPs - $110k Higher One; $172k Bancorp Bank
Higher One must:

• Not charge NSF fees to accounts that have

been in a continuous negative balance for

more than 60 days.

• Not charge more than 3 NSF fees per day

on an account.

• Only one NSF fee may be charged per

transaction that is returned unpaid in any

21 day period.

• Marketing materials must be updated to

eliminate misleading representations.
Bancorp Bank must:

• Increase board oversight.

• Improve compliance management.

• Improve audit program.

• Increase oversight on third parties.

In the Matter of Discover Bank

FDIC – 9/24/12

CFPB – 9/24/12

Deceptive credit card add-ons

Joint enforcement by FDIC and CFPB where Discover alleged to have engaged in deceptive telemarketing and sales tactics regarding credit card add-on products:

  • Payment protection

  • Credit score tracking

  • ID theft protection

  • Wallet protection

Telemarketing scripts contained misleading language likely to deceive consumers. Key terms downplayed and reps spoke quickly during the part of the call in which prices and terms of the add-on products were disclosed.

Discover must pay $200m consumer refund plus addition $14m penalty.

Amex, American Express Centurion Bank

FDIC – 10/1/12




Deceptive credit card marketing and debt collection

It was determined that the Bank violated federal law prohibiting unfair and deceptive practices by, among other things:

  • Misrepresenting to consumers that if they entered into an agreement to settle old debt (that was no longer being reported to credit bureaus), such settlement would be reported to credit bureaus, thereby improving consumers’ credit scores.

  • Using settlement solicitations that implied that consumers who entered into settlement agreements to partially pay such debts would have the remaining balance of their debts forgiven, when in fact the balance remained a debt owed to Amex.

  • Using solicitations that misrepresented points and awards.

Settlement reached with regulators. Consent orders, restitution, order to pay, CMPs

Advanta Bank Corporation

FDIC - 2009

Cash Bank Rewards for Credit Cards

Advanta's credit card "Cash Back Reward" program advertised a percentage of cash back on certain purchases by business credit card accountholders.

  • Tiered structure of the cash back payments meant that not all purchases would qualify for advertized cash back rate.

  • It was nearly impossible to earn the stated percentage of cash back reward payments.

FDIC issued a C&D. Bank must pay restitution of $14m to affected customers, and to pay a civil money penalty of $150k.

American Express Bank

OTS and FDIC - 2009

Credit Card Convenience Checks

The OTS and FDIC brought enforcement actions against American Express Bank for failure to honor credit card convenience checks without notice. Customers paid returned check fees and experienced a negative impact upon to their credit report.

CMP of $250k

Mortgage Products

Massachusetts v. Fremont
897 N.E.2d 548, 551 (Mass. 2008)

Massachusetts Attorney General;

Commonwealth of Massachusetts


Mortgage Lending; Servicing, Foreclosures

Subprime lending and foreclosure practices


• Lender should have reasonably foreseen

borrower inability to make scheduled


• Unfair for lender to make high-priced loan,

reap rewards of high fees and points, then

enjoy benefits of foreclosure.

Agreement with AG –

Bank must provide AG with 90 days advance notice of any foreclosure action. Foreclosure process substantively changed in Massachusetts as a result of this action.

Levin v. Citibank

2009 WL 3008378 (N.D. Cal. 2009)

Civil Lawsuit – 8/30/10

HELOC Reduction in Credit Availability

Home equity line of credit reduction deemed unfair and deceptive.

Although Reg Z provides that creditors may reduce/suspend HELOCs when the value of the borrower’s home is significantly less than the appraisal value, the commentary to Reg. Z states that what constitutes a “significant decline” depends upon individual circumstances.

Court ruled partially in favor of Levin

and partially in favor of bank. However, plaintiffs given permission to file new class action suit.

Although Reg. Z permits a lender to reduce HELOC if valuation of home declines, court partially sided with Levin in that it acknowledged he had paid down amount owed (partial increase in equity) and that appraisal used to value home was faulty.

Ellis v. J.P. Morgan Chase & Co.
US District Court for the Northern District of California

Case No. 12-cv-03897-YGR

Civil Lawsuit –


Mortgage Lending

Borrowers of mortgage loans had standing to bring a claim of a violation of the California Business and Professions Code for unfair business practices where the borrowers paid some or all of the alleged unlawful fees and where the lender had omitted an itemization of fees that would have identified the true nature of each charged fee and instead included a "miscellaneous fee" category of fees never incurred by the borrowers.

No adjudication yet. Borrowers allowed to

bring a claim forward.

Loan Servicing

Ohio v. Mortgage Servicers

Ohio Attorney General – 2/9/12

Loan Servicing

Inefficient handling of complaints, inquiries and disputes



• Lenders criticized for not taking action to

prevent foreclosures.

• Inadequate handling of consumer

complaints and requests for information.

• Inadequate customer service

• Unreasonable or unwarranted fees

• Misrepresenting terms of loan


• Misrepresenting that a borrower qualifies

for a loan modification.

Lead to National Settlement with

Mortgage Servicers

Fairbanks Capital (now known as Select Portfolio Servicing)

FTC – 9/4/07

HUD – 9/4/07

Mortgage Servicing; RESPA, FDCPA, FCRA, force placed insurance

Subprime loan servicer charged with illegal loan servicing practices.

• 5 year prohibition on marketing optional

products (e.g. home warranties).

• Refunds of optional product fees to


• Full disclosure of attorney or payoff fees

required in connection with foreclosures.

Reimbursement of fees charged that were

not actually performed.

• Monthly mortgage statements did not

include important information about loans.

• Payments applied to fees first, then P&I.

2003 settlement with several subsequent amended orders. Includes $40m settlement, restitution to borrowers.

Joint Federal-State Mortgage Servicing Settlement

DOJ, HUD, State Attorneys General – February 2012

Unfair and deceptive mortgage servicing practices

Action brought against five leading mortgage servicers, large joint federal-state settlement in history. Resulted in widespread reform in the loan servicing industry.

  • Robo-signing

  • Dual-track processing (modification and

foreclosure at same time)

  • Poor customer service

  • Overall servicing misconduct


  • Foreclosure affidavits must be based on personal knowledge.

  • Standing to foreclose must be documented and disclosed to borrowers.

  • Pre-foreclosure notice must be sent to borrowers.

  • Borrowers must be evaluated for loss mitigation options before foreclosure referral.

  • Procedures required re default fees, accuracy of account information, including audits of accounts and monthly billing.

  • Procedures required to ensure oversight of foreclosure vendors.

  • SCRA – enhanced protections.

$25b settlement; $17b in assistance to be provided to homeowners; $5.2b allocated for homeowner assistance. Historic joint federal-state settlement with the country’s five largest mortgage servicers:

  • Ally/GMAC

  • Bank of America

  • Citi

  • JP Morgan Chase

  • Wells Fargo

Murphy v. Ameriquest
O4 CV 12651 RWZ

Civil Lawsuit - 2004

ARMs – Loan Servicing

Ameriquest sued for engaging in deceptive loan servicing practices and unfair financial gain under Mass. UDAP statute, 93A. Bait and switch tactics and improper disclosure of ARM features.

  • Confusing interest rate structure;

  • High points and fees;

  • Large number of “discount points” that resulted in thousands of dollars added to principal;

  • Duplicative costs charged during refinances; and

  • Unjustified repayment penalties

A stipulation was reached in 2006. Note that the stipulation was reached through other Ameriquest borrowers joining forces in a class action.

FTC v. Capital City Mortgage Corporate

FTC –2005


FTC brought an enforcement action for Capital City refusing to release lien after final payment made on mortgage. This practices was deemed to be a violation of the FTC Act, section 5:

• Caused substantial economic injury when

the liens were not released upon full


• Practice not outweighed by benefits to

Capital City;

• Consumers could not reasonable avoid the


The FTC stated that “consumer cannot chose their loan servicer” which echoes recent comments by the CFPB.

Llewellyn v. Allstate, Nomura Credit and Capital, NCC Servicing, Ocwen, et. al.
No. 11-1340

2013 – US Court of Appeals for the 10th Circuit

Loan Servicing

Servicing had been transferred to Ocwen without proper notice to the borrower. Then Ocwen transferred the servicing to NCC. However, the borrower had been making payments to Allstate, the original servicer but they were not posted correctly and timely. As a result, the loan became delinquent. Behind the scenes, Allstate transferred the funds to Ocwen, then Ocwen transferred the funds back to Allstate because the loan had subsequently been transferred to NCC.
Ocwen continued to negatively report the loan which adversely impacted the borrower’s credit. The borrower made several complaints to Ocwen which were not properly or adequately resolved. The borrower faced hurdles that became insurmountable in trying to resolve the delinquency and credit reporting issue. However, he ultimately filed a lawsuit for alleged “outrageous conduct” by Ocwen for loan servicing deceptions, unfair treatment and erroneous credit reporting.

The district court found in favor of Ocwen. The Appeals court “remanded” the case (which is to the borrower’s favor). The case will now be heard again in the district court.

Russell v. BAC Home Loans Servicing


2001 WL 99016


Civil Lawsuit


Mortgage Loan Servicing

First Massachusetts case setting standards for banks’ violations of Consumer Protection Act.

Borrowers alleged that BAC violated Mass. Gen. L. c. 93A, the Consumer Protection Act, by failing to comply with federal regulations relating to the Home Affordable Modification Program (“HAMP”).

Although the case was dismissed, it set important standards and highlights banks’ requirements to abide by UDAAP statutes, including the state UDAAP statute, MGL 93A.

Credit Products

Republic Bank and Trust



Refund Anticipation Loans

Unfair and deceptive practices were found relative to Refund Anticipation Loans offered by the Bank. Moreover, the Bank was found to have engaged in unsound banking practices and to have deficient oversight of third party vendors providing electric refund services on the Bank’s behalf.

Cease and Desist – The Bank may no longer make Refund Anticipation Loans
CMP of $900k (and the Bank may not seek indemnification from any third party)

JPMorgan Chase Bank, NA


Auto Loans - Chase Payment Assurance (“CPA”)

Chase cited for UDAAP and FTC Act violations related to “debt cancellation” and “debt suspension agreements” related to auto lending (collectively "credit protection products"), which consisted of an agreement by the Bank to suspend or cancel all or part of the customer's obligation to repay an outstanding account balance upon the occurrence of a qualifying event, in exchange for a monthly fee. The Bank's credit protection products imposed various eligibility requirements, provided various exclusions, and set forth a process for claiming benefits.
Customer service representatives (“CSRs”) utilized high-pressure sales tactics and made materially false, deceptive or misleading oral statements relating to the cost and coverage terms of the CPA product marketed and sold to Chase Auto customers. Written scripts and training materials with instructions to use statements as "rebuttals" in response to Chase Auto customers who declined or were not initially inclined to purchase CPA. Certain rebuttal statements were deceptive or otherwise materially misleading because they could lead a reasonable consumer to misapprehend what was being offered and affects a reasonable consumer's decision to purchase CPA.
This practice was also subsequently found to have existed in credit card lending, home loan lending and other Chase products.

Consent Order:
CMPs - $2m
Restitution to customers


American Debt Settlement Solutions


May 2013

Fees related to debt relief

The CFPB fined service provider $500k+ for selling debt relief products and services that mislead consumers. The fees charged are deemed “illegal” by the CFPB.
The service provider charged consumers illegal upfront fees for debt-relief services that rarely, if ever, materialized

$500k+ fines

Achieve Financial Services


FDIC – June 2013

Practices related to unfairness and deception regarding a prepaid mastercards. Specific UDAAP allegations alleged regard advertising and marketing, resolving claims of dispute, and issues pertaining to delivery via ACH of federal benefits payments. The use of the word “free” particularly caught the FDIC’s attention and in addition to CMPs, the consent order items mandated by the FDIC is quite lengthy.

Lengthy consent order

1 Woodforest Bank was ordered to take remedial action with respect to ODP: set forth all aspects of each overdraft program to be offered by the Association, including without limitation the standards under which a customer qualifies for the program; limitations on fees and the numbers of transactions on which fees may be charged; and disclosures, marketing, promotional materials, contract provisions, terms, account management, monitoring, internal controls, and implementation associated with the overdraft programs; ensure that marketing materials do not mislead or make implied representations that a deposit account product is suitable for consumers who have mishandled their credit or bank accounts in the past. The Bank was also prohibited from marketing deposit accounts as being “free” or “low cost” while omitting costs, including ODP fees. The Bank was also required to disclose certain ODP features about ineligibility, suspension or reinstatement of accounts. The Bank must also cease to assess additional daily OD fees (continuing overdraft fees) due to an account being continually overdrawn.

© 2013 FIS and/or its subsidiaries. All Rights Reserved.

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