WASHINGTON (5/1/13)--RBS Citizens, N.A. has been ordered to pay $2.5 million in total restitution to 265,000 customers under an overdraft settlement announced Tuesday by the Office of the Comptroller of the Currency.
The OCC has also assessed a $5 million civil money penalty against the bank for alleged violations of section 5 of the Federal Trade Commission (FTC) Act. According to the OCC, RBS employees made inaccurate or misleading statements about:
The alleged violations took place between September 2007 and September 2011.
Customers that were wrongfully charged as a result of these practices will be reimbursed, with interest. The OCC has also ordered RBS Citizens to take actions to ensure this issue does not recur. Those actions include:
RBS Citizens' state bank affiliate, Citizens Bank of Pennsylvania, has also been ordered to pay $1.4 million in restitution to more than 75,000 consumers for similar violations. The Federal Deposit Insurance Corp. order also imposed $5 million in civil penalties.
For more on the settlements, use the resource link.
The Credit Union National Association has frequently noted that reasonable overdraft protection plans help assure consumers will have access to funds when they need them. Because of their cooperative structure, credit unions do not have financial incentives to charge members the high fees that banks frequently do in order to maximize profits for shareholders, CUNA said.
Reps. Carolyn Maloney (D-N.Y.) and Maxine Waters (D-Calif.) in mid-March introduced legislation that would cap overdraft fees, impose a limit on the number of overdrafts that a member could use per year, and require financial institutions to post credits and debits in a particular order. CUNA said the bill "seems to address a problem that doesn't exist in the credit union system," and has encouraged legislators and regulators to note the credit union difference as they move to regulate overdraft protection programs.
Overall, credit unions charge less for the service than banks. A recent Moebs Services survey shows that the average charge for an overdrawn account of $40 was $30 at banks, but $27 at credit unions. Overdraft revenue at banks, credit unions and thrift institutions totaled $32 billion last year, up $400 million or 1.3% from 2011, said the study. (Use the resource link to read April 2 News Now story: One-fourth Of Consumers With Checking Accounts Have Overdrafts.)