CFPB Updates This Week


CFPB Orders Atlantic Union Bank to Pay $6.2 Million for Illegal Overdraft Fee Harvesting

The Consumer Financial Protection Bureau (CFPB) today took action against Atlantic Union Bank for illegally enrolling thousands of customers in checking account overdraft programs. The CFPB found that Atlantic Union misled consumers who enrolled in this overdraft service by phone and failed to provide proper disclosures. The CFPB is ordering Atlantic Union to refund at least $5 million in illegal overdraft fees and pay a $1.2 million penalty to the CFPB’s victims relief fund.

Atlantic Union Bank (NYSE: AUB) is a subsidiary of Atlantic Union Bankshares Corporation, a bank holding company headquartered in Richmond, Virginia. As of March 31, 2023, Atlantic Union had over $20 billion in total assets.

The Electronic Fund Transfer Act and its implementing regulation require banks to describe their overdraft service in writing before getting a consumer to opt-in to overdraft coverage for ATM withdrawals and one-time debit card transactions.

The CFPB’s order describes the bank’s illegal conduct and how it improperly communicated with and enrolled consumers in its overdraft program. Specifically, the bank violated federal law by:

  • Charging fees without proper consent: At Atlantic Union Bank branches, employees gave oral descriptions of the bank’s overdraft coverage to new customers who opened checking accounts. Employees sought oral confirmation from customers to enroll in overdraft coverage before providing them with the required written disclosures describing the terms of service.
  • Misleading customers about the terms and costs of overdraft coverage: For customers who enrolled in overdraft coverage by phone, Atlantic Union Bank employees did not clearly explain which transactions were covered by the service, and made other misleading statements about the terms and conditions of the service. In some calls, bank employees also omitted key information about the cost of the service and the fact that consumers could incur a hefty overdraft fee for each transaction covered by the service.

Enforcement Action

Under the Consumer Financial Protection Act (CFPA), the CFPB has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB found Atlantic Union Bank violated the Electronic Fund Transfer Act’s opt-in requirements for overdraft services, and it found the bank engaged in deceptive acts or practices in violation of the CFPA.

The order requires Atlantic Union to end its unlawful practices and:

  • Refund $5 million to thousands of consumers: The bank must pay at least $5 million in redress to thousands of affected consumers illegally charged overdraft fees.
  • Pay a $1.2 million fine: Atlantic Union will pay a $1.2 million penalty to the CFPB’s victims relief fund.

State Regulatory Developments on “Income-Based Advances”

The CFPB has submitted input on a proposal by the California Department of Financial Protection and Innovation explaining states’ critical role in oversight of providers of consumer financial products and services.

In our nation’s system of federalism, both federal and state governments play important roles in safeguarding the public’s interest. Consumer protection laws are a critical example of how that system works.

The CFPB carefully monitors developments in state law and regulation relating to consumer financial protection. The California Department of Financial Protection and Innovation (DFPI) recently proposed to undertake registration and examinations of companies that provide what the proposal refers to as “income-based advances.” Earlier this week, the CFPB submitted input on DFPI’s proposal.

The CFPB’s letter notes that income-based advances – products where repayment is related, at least in theory, to a worker’s next payday – have long been part of the U.S. consumer lending market. The letter explains that states have long provided critical oversight of companies that provide consumer financial products or services, like those typically offering income-based advances. This oversight is crucially important for ensuring that companies are meeting their legal obligations. The CFPB indicates that, by treating income-based advance products as loans and including a variety of charges that accompany the advance as “charges,” DFPI’s proposal takes a similar approach to federal law—the Truth in Lending Act and the regulation that implements it.

Given the many developments in this market, the CFPB plans to issue further guidance to provide greater clarity concerning the application of federal law to income-based advance products.

Read the letter here.