CFPB Takes Action Against TCF National Bank’s Overdraft Opt-in Practices

The Consumer Financial Protection Bureau took action against TCF National Bank for the bank’s overdraft opt-in practices.  As described in the Bureau’s complaint, TCF relied on overdraft fee revenue to a greater degree than most other banks its size and recognized early on that the opt-in rule could negatively impact its business.

In late 2009, it estimated that approximately $182 million in annual revenue was “at risk” because of the opt-in rule. It began consumer testing that same year. Through this testing, the bank determined that the less information it gave consumers about opting in, the more likely consumers would opt in.

The lawsuit alleges that TCF was in violation of Regulation E, in addition to having acts and practices that the Bureau determined were “Unfair, Deceptive, or Abusive.”

Specifically, the CFPB alleges that the bank:

  • Tricked new customers into believing optional overdraft was mandatory and obscured fees: The bank determined through consumer testing that if new customers were asked to opt in at the same time they were being asked to agree to other mandatory terms and conditions of a new account, the opt-in rate more than doubled. So, it placed the opt-in decision immediately after a series of mandatory items the consumer had to agree to in order open the account, rather than at the time they received the mandatory notice about their opt-in rights.The bank then provided branch employees with scripts that did not explain that opting in was optional, or that it amounted to giving the bank permission to authorize transactions that would result in fees. Most consumers fell into the rhythm of initialing the terms of the agreement and signed on.
  • Adopted a loose definition of consent to opt in existing customers: TCF also ran a campaign to get customers who already had an account to opt in. TCF branch employees called those existing customers using a script the bank had provided. Instead of asking consumers whether they wanted to have their overdrafts covered for a $35 charge, staff was instructed to ask customers whether they wanted their “TCF Check Card to continue to work as it does today?” Many consumers did not understand that this was granting the bank permission to authorize transactions and charge them overdraft fees that they would otherwise not have to pay.
  • Pushed back on consumers who challenged opting in by using emotionally charged hypothetical situations: TCF consistently instructed its staff not to “over explain” the terms and conditions of its opt-in program. If new or existing consumers challenged or questioned opting in, the bank instructed its staff to sell the product by suggesting a hypothetical situation, such as an emergency with high stakes where they would desperately need access to money.

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA announced that five credit unions have been certified as Community Development Financial Institutions.

The NCUA announced that it will host a webinar to cover the SBA Loan Program opportunities available to credit unions. The webinar will be held on Wednesday, February 15, 2017. Credit unions interested in the webinar can register here.

The NCUA released their board action bulletin for their January 2017 board meeting. In the bulletin, the NCUA announced that it is seeking comments on alternative forms of capital and that civil monetary penalties have been adjusted for inflation.

The NCUA announced that it will host a consumer compliance webinar on Tuesday, February 28, 2017. The webinar will share information with credit unions regarding the new HMDA reporting requirements and the prepaid account changes. Credit unions interested in attending the webinar can register here.

The January issue of the NCUA Report is now available. This month’s report features an article on the benefits of the Community Development Financial Institutions Fund.

Consumer Financial Protection Bureau (CFPB)

The CFPB announced that it is accepting applications for its Advisory Board and Councils, which includes the Credit Union Advisory Council.

CFPB Director Cordray delivered prepared remarks on the TCF Bank Enforcement Action Press Call. The CFPB is suing TCF National Bank because they believe the bank tricked consumers to opt into overdraft services through unlawful marketing tactics.

In a recent blog entry, the CFPB discussed the overdraft opt-in process that is required under Regulation E. The CFPB also listed several steps that consumers can take to reduce or eliminate overdraft fees.

Federal Reserve Board (FRB)

The FRB, OCC, and FDIC announced the extension of their comment period for the ANPR on Enhanced Cyber Risk Management Standards for large and interconnected entities. The comment period has been extended from January 17, 2017 to February 17, 2017.

The January edition of FedFlash is now available.

The FRB released the January 2017 Beige Book.

FRB Chair Janet Yellen delivered a speech on the economic outlook and the conduct of monetary policy at the Stanford Institute for Economic Policy Research. In the speech, Yellen discussed the progress of the labor market, maintaining sustainable growth in a context of price stability, and evaluating the appropriate stance of monetary policy.

U.S. Department of Labor (DOL)

The DOL has released a new FAQ aimed at answering questions regarding consumer protections for retirement investors.

Office of the Comptroller of the Currency (OCC)

The OCC issued an updated Management Interlocks booklet of the Comptroller’s Licensing Manual.

Federal Housing Finance Agency (FHFA)

The FHFA is requesting public input on chattel loan pilot initiatives for Fannie Mae and Freddie Mac and the proposed Evaluation Guidance under the final rule on Duty to Serve Underserved Markets.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of January 17, 2017. The last update prior to this was January 12, 2017.

Compliance Question of the Week

Robberies are on the rise. What can the credit union do to mitigate risk?

There are several steps that credit unions can take to help mitigate the risk of a robbery. First, ensure that your credit union staff is up to date on their robbery training. Robbery training should encompass best practices as well as credit union specific policies and procedures.  It is important that each team member knows the procedures that the credit union enforces to help mitigate its risk. An example of this would be ensuring that the staff is enforcing the no hats/sunglasses policy if this is a policy of the credit union.

Credit unions can also access information about recent robberies by talking with law enforcement, reviewing robbery alerts sent by the Association, and talking with other financial institutions. Knowing about robberies in your area can help you detect and potentially mitigate a situation before it escalates into a robbery.

Ensure that your robbery packet/kit is up to date so it is ready for use in the event that a robbery occurs. It is important that the kit address important changes such as branch address and/or phone numbers. Additionally, the kit should be reviewed frequently to ensure that there is an adequate supply of necessary items, such as branch closure signs and robbery description forms. The robbery kit should be located somewhere that is easily accessible by branch staff so that it can be retrieved quickly if needed.

If you would like additional information about industry best practices, training materials, or robbery packets, please reach out to the Association’s compliance department.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Advocacy News, Compliance News, Compliance News, Federal, NCUA.