USAA Federal Savings Bank to pay more than $ 15 million in restitution and fines to settle Consumer Financial Protection Bureau claims that the bank neglected stop payment requests and reopened deposit accounts without customers’ consent .
The CFPB consent order, announced Thursday, alleged the bank refused to investigate when customers claimed funds were mistakenly debited. The agency specifically identified the USAA’s process for responding to disputed payday loan transfers as the source of the bank’s flawed practices.
The CFPB said the USAA also engaged in unfair acts or practices from 2011 to 2016 by reopening consumer deposit accounts closed under certain circumstances without notice.
The order says the USAA reopened 16,980 closed accounts without obtaining consumer authorization and that 5,118 customers incurred approximately $ 270,000 in fees. In July 2017, the USAA reimbursed these clients’ fees plus interest.
The San Antonio bank, with $ 82.2 billion in assets, agreed to pay a fine of $ 3.5 million and $ 12 million in restitution to 66,000 members for violating the law on the electronic funds transfer, Regulation E and the Consumer Financial Protection Act 2010, the CFPB said.
The 39 page consent order said the USAA refused to stop or correct payday loan payments after customers informed the bank of alleged errors on electronic funds transfers that they believed were incorrect, unauthorized or exceeded the authorization granted by the consumer.
“Until May 2015, as a policy, the USAA did not investigate reported errors unless the consumer claiming the error submitted a completed form [written statement of unauthorized debit] within 10 days of the USAA sending the form to the consumer, ”the consent order states.
Regulation E requires financial institutions to promptly investigate suspected errors and report or send the results of an investigation to the consumer within 10 business days.
A spokesperson for the USAA said the bank had improved its procedures and started reimbursing some customers last year.
“None of the issues reflect an intention to take advantage of our members,” spokesman Matt Hartwig said in an emailed statement. “The USAA has been proactively addressing these issues for over a year and most of them are resolved. We take responsibility for this situation.
The CFPB consent order stated that the USAA’s procedure for responding to alleged errors involving payday loans was separate from that for other types of payment disputes. If a customer had a complaint about a payday loan, the USAA asked customers to contact the payday lender – not the bank – to dispute the transaction.
“Repeatedly, USAA officials have refused to investigate errors because they relate to payday loans,” the order says.
USAA officials have also warned consumers of the potential legal and financial consequences of a request for an error resolution investigation into a payday loan agreement, going so far as to tell customers that their membership at the USAA was “in danger” if they did.
According to the CFPB Consent Order, “until at least April 2013, the proceedings have asked USAA officials to say, ‘If we determine that the ACH debit in question has been authorized, you will put your membership on. USAA in danger. What this means to you is that you may become ineligible to purchase additional USAA products and existing USAA accounts may be closed. Additionally, please understand that making a false statement to a bank is a crime federal and that this is punishable by a fine of up to $ 1 million or jail time of up to 30 years, or both. “
As late as March 2016, the USAA required consumers disputing a payday loan debit transaction to submit a notarized written statement to the bank, according to the order. USAA would not conduct an investigation without a notarized written statement.
The USAA said that, like most banks, it can temporarily reopen closed accounts to process certain transactions, such as debits or credits that a customer has previously authorized, or to resolve a dispute. The bank made a distinction between reopening deposit accounts and the Wells Fargo scandal which involved the opening of millions of unauthorized accounts. “The procedure is purely administrative and does not relate to sales targets, and the bank does not offer any incentives to employees related to the practice,” said Hartwig.