All Banking Law, All in One Place. Bloomberg Law: Banking is the comprehensive research solution that powers your practice with access to integrated banking-related legal news, analysis,...
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
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.
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.”
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 email@example.com
To contact the editor responsible for this story: Mike Ferullo in Washington at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)