CFPB Fines Santander Bank $10 Million for Overdraft Practices

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By Jeff Bater

July 14 — The U.S. subsidiary of Banco Santander will pay $10 million to settle charges its vendor engaged in deceptive marketing and signed up customers for an overdraft service without their consent, the Consumer Financial Protection Bureau said.

Santander Bank, found to have violated the “opt-in rule,” agreed to give consumers the opportunity to provide their affirmative consent to overdraft service and to increase oversight of vendors it uses to market consumer financial products or services. Under the consent order with the CFPB announced July 14, the bank is prohibited from using outside parties to market its overdraft service.

Santander offers overdraft service with its checking accounts. An overdraft can occur when consumers spend or withdraw more money from their checking accounts than is available. The CFPB said that from 2010 to 2014, Santander marketed and enrolled consumers in an overdraft service for ATM and one-time debit card transactions, and charged consumers $35 per overdraft. The bank used a marketing firm to call consumers to persuade them to opt in to the overdraft service and rewarded the vendor with a higher hourly rate when it hit specified sales targets, according to the bureau

Opt-In Rule

In 2010, federal rules took effect prohibiting banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers affirmatively “opt in” for the service. If consumers don’t sign up, banks may decline the transactions because of insufficient or unavailable funds, and can’t charge an overdraft fee.

The CFPB said it found consumers were deceived that Santander's overdraft service was free. Furthermore, some call representatives told consumers they risked being charged additional fees if they did not sign up for the overdraft service. In addition, representatives falsely claimed the call was not a sales pitch. Also, the bank failed to stop its telemarketer’s deceptive tactics, the CFPB alleged.

“Santander tricked consumers into signing up for an overdraft service they didn’t want and charged them fees,” CFPB Director Richard Cordray said in a news release. “Santander’s telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service.”

The CFPB accused Santander Bank of violating the Electronic Fund Transfer Act and the Dodd-Frank Act. Under Dodd-Frank, the agency has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices, or other violations of federal consumer financial law.

Santander Response

The Wilmington, Del.-based bank didn't admit or deny wrongdoing in the consent agreement. Santander operates a network of nearly 700 retail branch offices in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island.

“Santander Bank is committed to always treating our customers fairly and ensuring our vendors do too,” a Santander spokesperson said in an e-mailed statement. “We regret that the vendor we hired to promote this service may not have followed our instructions and we did not supervise them as closely as we should have. These actions, which occurred several years ago, do not reflect our values and fell short of the high expectations we have for ourselves and our vendors.”

The bank said it will cut ties with the marketing firm that engaged in the alleged practices and implement additional controls “to ensure more effective oversight of our vendors and our processes.”

‘Point of Sale.'

Rachel Rodman, a former CFPB enforcement attorney who is now counsel at Arnold & Porter, said the agency is “clearly concerned that banks are using deceptive sales tactics to ‘persuade' their customers to opt-in to overdraft service.”

“This case shows that the CFPB is willing to look behind the written policies and procedures and devote significant investigative resources to examining what banks are actually saying to their customers at the point of sale,” she said in an emailed comment.

Overdraft fees are an area where the CFPB's enforcement action has preceded any rulemaking. In April 2015, the agency fined Regions Financial Corp. $7.5 million to settle claims that the bank charged overdraft fees to consumers who hadn't opted in for coverage (82 BBD, 4/29/15).

The CFPB settlement with Santander follows a rejection by the Federal Reserve of the capital plan submitted by Santander Holdings USA as part of the Fed's annual Comprehensive Capital Analysis and Review (CCAR). In a late June announcement the Fed said its objection to the capital plan was based on qualitative concerns (126 BBD, 6/30/16).

To contact the reporter on this story: Jeff Bater in Washington at

To contact the editor responsible for this story: Mike Ferullo in Washington at

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