TCF Bank has recently agreed to pay a $30 million settlement to resolve an overdraft protection lawsuit, which was filed by the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC).

These agencies filed this overdraft protection lawsuit after reviewing TCF Bank’s marketing statements and advertisements that described their overdraft protection policies.

The CFPB announced that it had filed the proposed settlement for the overdraft protection lawsuit in Minnesota federal court. The settlement consists of $25 million in restitution fees to customers who were allegedly charged unfair overdraft fees.

An additional $5 million civil penalty was also added by the CFPB, but the amount may change due to a potential $3 million penalty by the OCC as part of a separate consent order.

The overdraft protection lawsuit was filed in January 2017. The CFPB alleged that TCF Bank had used deceitful tactics to convince hundreds of thousands of customers into signing up for overdraft protection.

The overdraft protection lawsuit alleged that convincing customers to sign up for this expensive coverage had become “central to the bank’s business model,” and that the bank had practiced years before the federal government implemented Regulation E in 2010.

According to this regulation, the federal government made it illegal for banks and credit unions to sign customers up for overdraft protection without their consent.

Overdraft fees are incurred when the customer’s primary checking account becomes overdrawn, and the bank or credit union advances funds to cover the transaction.

Overdraft protection is marketed to help protect customers from the public embarrassment of card decline, but this has allegedly become an abusive tool that many financial institutions have used to maximize their profits.

The overdraft protection lawsuit alleged that TCF Bank had designed its application for opening accounts in a way that tricked consumers into thinking that overdraft protection was required.

Overview of Overdraft Protection Lawsuit

TCF Bank was accused of this strategy to prevent losing profit loss that they previously suffered from their overdraft policies.

According to the overdraft protection lawsuit, TCF Bank had made $182 million in annual fees before Regulation E was enacted. TCF Bank had allegedly developed a complex strategy to convince customers to sign up for overdraft protection, including giving incentives to employees to increase their sales numbers.

According to the overdraft protection lawsuit, these methods worked with 66 percent of the bank’s customers opting in–triple the number of overdraft customers in other banks. TCF Bank disputed the claims, stating they had followed federal regulations when presenting customers with their overdraft protection.

TCF Bank states that they provided their customers “with written disclosures about our overdraft serves that fully complied with the law and regulations,” but the bank acknowledges that “there is a possibility that some customers may not have fully understood their options for participating in the service between 2010 and 2013.”

Under the terms of the settlement, TCF Bank does not admit to any wrongdoing or other illegal activities in regards to the overdraft protection allegations.

This Overdraft Protection Lawsuit is Consumer Financial Protection Bureau v. TCF National Bank, Case No. 0:17-cv-00166, in the U.S. District Court for the District of Minnesota.