TCF accused of tricking customers
Thousands signed on to overdraft fees
U.S. oversight officials accused Minnesota-based TCF National Bank of tricking hundreds of thousands of customers into accepting overdraft fees and rewarding employees for getting people to sign up.
The Consumer Financial Protection Bureau filed a lawsuit Thursday against TCF, seeking penalties and compensation on behalf of consumers.
The agency, which filed the lawsuit on the final full day of the Obama administration, said the matter bears similarity to the scandal involving Wells Fargo, whose employees earned incentives for opening fake accounts.
CFPB said TCF executives were thrilled with the revenue they generated through overdraft fees, with former CEO and current chairman Bill Cooper dubbing his “pleasure boat” the “Overdraft” and leaders throwing parties to celebrate their success.
The agency said TCF’s 66% opt-in rate for overdraft fees was more than three times higher than the industry average.
TCF said it hopes to reach “an appropriate resolution” but plans to “vigorously defend” itself. The bank, which has more than $21 billion in assets, has about 360 retail branches in Minnesota, Wisconsin, Illinois, Michigan, Colorado, Arizona and South Dakota.
“We believe we have strong, principled defenses to its complaint,” the bank said in a statement. “TCF rejects the Bureau’s claims and we believe we treated our customers fairly, we complied with all laws and regulations at all times, and our overdraft protection program is a valued product for our customers.”
The bank said only 341 of 2.6 million customers had complained about the opt-in process, saying they were “clearly informed” of their rights “before, during and after they made their opt-indecision.”
CFPB director Richard Cordray said TCF faced a potential loss of $182 million in overdraft revenue when the Federal Reserve adopted rules in 2009 abolishing overdraft fees unless consumers specifically agree to accept them.
“We believe TCF trained its employees to use unlawful tactics in their marketing to consumers,” Cordray told reporters. “They made overdraft seem mandatory when it was not. They obscured information about fees when opening accounts for new customers. They adopted a loose definition of ‘consent’ to opt in existing customers, and they pushed back aggressively against any customer who questioned the process.”
Bank employees were given incentives to get consumers to opt in to $35 fees “using an uninformative script that failed to mention fees” and limited disclosures, according to the agency’s lawsuit. Branch managers could earn up to $7,000 for achieving high opt-in rates, CFPB alleged.
Banks have come under fire for providing bonuses to employees for aggressive sales techniques. Wells Fargo said last week that it had eliminated product goals from its compensation structure. That scandal has cost the company $185 million in government fines and led to the abrupt retirement of the company’s CEO.
In TCF’s case, regional managers held monthly meetings to “single out any branch manager who was struggling to meet” the goals in what “often felt like an act of public shaming,” according to the lawsuit. Some employees felt like they could lose their jobs for failing to meet goals, CFPB said.
TCF said it rejected those claims but did not comment specifically on its compensation structure.