In November 2020, Regions Financial disclosed that the bank is currently under investigation by the Consumer Financial Protection Bureau (CFPB) for potentially engaging in deceptive and unfair practices regarding bank overdraft fees.

Why Is the CFPB Investigating Regions Financial?

Regions Financial is based out of Alabama and offers financial services including retail and commercial banking, trust, stock brokerage, and mortgages. The company holds approximately $144 billion in assets, and operates branches in several states across the south and lower Midwest.

The Consumer Financial Protection Bureau is responsible for protecting consumers from businesses that engage in abusive or deceptive practices. The Bureau may monitor financial markets for potential risks, take consumer complaints, and enforce consumer protection laws.

According to a spokesperson for the bank, they are cooperating with the CFPB’s investigation into their policies. Spokesman Jeremy King stated, “We take any inquiry very seriously, and we believe we have structured our overdraft services in a way that meets the needs of customers while complying with rules governing these services.”

However, customers at Regions Financial and other banks may not agree that banks follow the rules when it comes to overdraft fees. Although additional details about the specifics of the Regions investigation have not been released, many banks have been accused of committing overdraft fee abuses by charging customers multiple overdraft fees stemming from a single purchase.

What Are Overdraft Fees?

Overdraft fees are fees that are charged by a bank or a credit union when a customer has opted into overdraft coverage and attempts to make a purchase despite not having an adequate level of funds in their account. When this occurs, the bank may cover the cost of the purchase as a loan, and assess a fee for doing so. Overdraft fees are often between $20 and $40.

However, according to consumer complaints, the ways that banks assess these fees may be deceptive. Rather than processing transactions in the order that they were made, some banks rearrange transactions and process them from largest to smallest. According to a study from the Pew Charitable Trusts, more than 40% of banks rearrange transactions out of chronological order. This practice may make it difficult for customers to know how much money is available to them. It may also make it more likely for customers to overdraft their account multiple times. If a customer has $50 in their account, and makes a $5 purchase, a $10, and a $55 purchase, they may expect to be assessed an overdraft fee for the final transaction. However, when these transactions are rearranged and processed out of order, the customer may be assessed an overdraft fee for all three purchases.

Although many banks and credit unions have limits on the amount of overdraft fees a customer may be charged in a single day, this number may range from as few as four to as many as twelve. As the average cost of an overdraft fee is around $33, these additional charges may quickly add up to a costly surprise.

Are Overdraft Fee Abuses Illegal?

While overdraft fees are legal, banks do have to follow regulations regarding when these fees may be charged. Customers must have opted in to overdraft protection in order to be assessed these fees, and banks should be clear about their policies regarding when these fees are charged and how much they will cost. Customers who have not opted in to overdraft protection may still be charged an NSF, or non sufficient funds fee, which may cost a similar amount to an overdraft fee. However, in these cases, the bank will deny the transaction. Customers who have received NSF fees have still reported being charged several NSF fees for a single transaction, as banks may attempt to re-process these purchases days later, often without the knowledge or consent of the customer.

Some consumers have filed overdraft fee abuses lawsuits against their banks, claiming that the practice of rearranging transactions is nothing more than a money grab from financial institutions. As banks in the U.S. charged customers approximately $11.7 billion in overdraft fees in 2019, they may be incentivized to continue engaging in potentially deceptive or unfair business practices.

If you were charged multiple overdraft fees by Regions Financial for a single overdrafting transaction, you may be eligible to speak with a qualified attorney about your legal options. Some victims of overdraft fee abuses may be able to file a class action lawsuit against their bank and pursue reimbursement for these fees, as well as additional compensation.