Federal regulators hit Citizens Bank with $31.5 million in restitution and penalties for what they described as unfair and deceptive practices related to the way the bank processed deposits.
Under consent orders with the FDIC, the CFPB and the OCC, Citizens Bank N.A. will pay $11 million in consumer refunds and $20.5 million in civil penalties for pocketing customers’ money resulting from deposit discrepancies.
Regulators said the bank violated both the Dodd-Frank Act and the Consumer Protection Act by failing to properly credit its customers’ checking and savings accounts when the amount of money on the deposit slip did not match the actual amount of cash or checks deposited. Between January 2008 and September 2012, the bank only looked into discrepancies of more than $50, and from September 2012 to November 2013, it only investigated discrepancies of more than $25, the CFPB said.
“The bank ignored discrepancies if they fell below a certain dollar amount – which at times was as high as $50,” CFPB Director Richard Cordray said in prepared remarks about the action. “One could argue that it all came out in the wash – some consumers benefited by this policy and some were harmed by it. But for those customers who were harmed, the bank kept the difference, and over the years shorted consumers millions of dollars. We believe this practice was unfair and deceptive.”
Furthermore, the CFPB said that the bank falsely claimed it would verify deposits, when in fact it only corrected deposit inaccuracies above $25 or $50.
“The bank may have seen these discrepancies as “rounding errors” not worth its time to pursue. But that is not sufficient. Even though some customers may have benefited from the policy in different circumstances, that fact did not nullify the harm to others,” Cordray said. “This is sloppy banking, and it violates the Dodd-Frank Act, which prohibits financial providers from engaging in unfair or deceptive practices.”
“As we continue to improve our performance as a company, we are pleased to have resolved this matter from an earlier era. We strive to do our best for our customers every day and to do right by customers when issues like this come to light,” the company said in a statement. “We are now working with our regulators to make appropriate redress as quickly as possible. As previously disclosed, we have adequate reserves to cover the redress and fines.”
The FDIC separately took action against Citizens Bank of Pennsylvania, ordering it to pay a civil money penalty of $3 million and restitution of $5.8 million for the same problem.
