CFPB Orders Santander Bank to Pay $10 Million Fine for Illegal Overdraft Practices
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CFPB Orders Santander Bank to Pay $10 Million Fine for Illegal Overdraft Practices

The bank deceptively marketed its overdraft service to consumers, violated "Opt-in" Rule

July 14, 2016

The Consumer Financial Protection Bureau (CFPB) has ordered Santander Bank to pay a $10 million fine for illegal overdraft service practices.

According to the CFPB, Santander's telemarketing vendor deceptively marketed the bank's overdraft service and signed certain bank customers up for the service without their consent.

Santander is a national bank based in Wilmington, Delaware. Santander Bank operates a network of nearly 700 retail branch offices in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island. 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 says that –from 2010 to 2014—Santander Bank marketed and enrolled consumers in its "Account Protector" overdraft service for ATM and one-time debit card transactions, and charged consumers $35 per overdraft. Santander used a telemarketer to call consumers to persuade them to opt in to the overdraft service and rewarded the telemarketer with a higher hourly rate when it hit specified sales targets.

"Santander tricked consumers into signing up for an overdraft service they didn't want and charged them fees," said CFPB Director Richard Cordray. "Santander's telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service. We will put a stop to any such unlawful practices that harm consumers."

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 willingly and affirmatively opt in to the service. If consumers don't opt in, banks may decline the transactions because of insufficient or unavailable funds—but cannot charge an overdraft fee.

The CFPB found that Santander marketed its overdraft service deceptively during telemarketing calls and enrolled consumers in overdraft service without their consent in violation of the "Opt-in rule." For example, during numerous telemarketing calls, call representatives did not ask the consumers if they wanted to opt in but enrolled them anyway.

In addition to paying the $10 million penalty, the CFPB says that Santander Bank will also be required to go back and give consumers the opportunity to provide their affirmative consent to overdraft service, not use a vendor to telemarket its overdraft service, and it must increase oversight of vendors it uses to telemarket consumer financial products or services.

View the CFPB's full consent order against Santander Bank.

Learn more about your rights as a consumer when it comes to overdraft protection.