The government’s consumer watchdog alleges that lofty sales goals drove the Minnesota-based bank to mislead hundreds of thousands of consumers into signing up for overdraft services. Consumers typically face overdraft charges of about $35 when they use their debit cards to spend more money than they have in their accounts. Federal rules put in place after the financial crisis prohibit banks from charging the fees on debit purchases or ATM withdrawals unless consumers opt in to the program. But the CFPB alleges that TCF violated those rules.
The agency said the bank made it seem as if overdraft services were mandatory for new customers by presenting them at the same time that customers were asked to agree to mandatory terms required to open an account. The move doubled the rate at which consumers were opting in to the service, according to the CFPB.
Federal rules also required banks to ask existing customers if they wanted to opt in to overdraft services. But the agency says TCF used vague language to have existing customers agree to overdraft services. For instance, existing customers were asked if they wanted their check cards to “continue to work as it does today.” If they said “yes,” then that was taken to mean that the customer had opted into the overdraft program.
At one point in 2014, some 66 percent of TCF customers had opted in to overdraft charges, about three times as much as other banks, according to the CFPB.
Branch employees were given various incentives to encourage customers to sign up for overdraft fees, according to the lawsuit. In 2010, managers at large branches were offered bonuses up to $7,000 for getting a high share of new customers to opt in to overdraft. Those bonuses were phased out, but some employees were told to aim to have 80 percent of new customers opt in to overdraft programs.
Bank executives celebrated the program’s success by throwing parties when they reached certain milestones, such as having 500,000 people opt in to the charges, according to the complaint.
The bank denies the charges, adding that it received only 341 complaints from 2.6 million customers about opting in to overdraft services between 2010 and 2015. “We believe that at all times our overdraft protection program complied with the letter and spirit of all applicable laws and regulations, and that we treated our customers fairly,” said a statement from TCF, which has about 340 branches in Minnesota, Wisconsin, Illinois, Michigan, Colorado, Arizona and South Dakota.
The bank told The Post in an emailed statement that employees who did not reach the quotas set for overdraft fees were not penalized or fired. TCF also said customers were given reminders that they could opt out of overdraft programs and that the scripts used by branch employees “were not misleading in any way.”
The lawsuit is in line with recent efforts from the CFPB to crack down on robust sales goals they say can lead to unnecessary costs and other harm for consumers. In September, the agency fined Wells Fargo for a scheme in which employees opened sham accounts for customers without their permission to meet sales goals and earn bonuses. And in November, the CFPB issued a memo warning financial companies against sales incentives that may lead to fraud.
The TCF case presents a few lessons for anyone with a checking account:
Know what you’re signed up for. Although overdraft programs are optional, many people don’t know they’re signed up for the services until after they’ve overdrawn their accounts. Some 52 percent who said they paid overdraft fees in 2013 were either not aware that their bank charged overdraft fees or only learned of the charge after the fact, according to a 2014 report from Pew Charitable Trusts. If you’re not sure whether you’re enrolled in an overdraft program, call your bank to find out.
Track your balance. Sign up for alerts so that you can receive a text message or email any time your account balance falls below a certain amount. Check your balance before a purchase, and note any other checks or bill payments that may be pending.
Link to a savings account. Consider linking your checking account to a savings account so that you can have money deducted from the savings account when you’re short in your checking account. There will still be a charge for this, but the fee is usually less than what you might pay for a traditional overdraft charge.