WASHINGTON, D.C. -- The Consumer Financial Protection Bureau (CFPB) has ordered Santander Bank, N.A. to pay a $10 million fine for illegal overdraft service practices. Santander's telemarketing vendor deceptively marketed the overdraft service and signed certain bank customers up for the service without their consent.
In addition to paying the civil money penalty to the CFPB, Santander Bank must go back and give consumers the opportunity to provide their affirmative consent to overdraft service, not use a vendor to telemarket its overdraft service, and it must increase oversight of vendors it uses to telemarket consumer financial products or services.
"Santander tricked consumers into signing up for an overdraft service they didn't want and charged them fees," said CFPB Director Richard Cordray. "Santander's telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service. We will put a stop to any such unlawful practices that harm consumers."
Santander is a national bank based in Wilmington, Del. Santander Bank operates a network of nearly 700 retail branch offices in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania and Rhode Island. Santander offers overdraft service with its checking accounts. An overdraft can occur when consumers spend or withdraw more money from their checking accounts than is available.
From 2010-14, Santander marketed and enrolled consumers in its "Account Protector" overdraft service for ATM and one-time debit card transactions, and charged consumers $35 per overdraft. Santander used a telemarketer to call consumers to persuade them to opt in to the overdraft service and rewarded the telemarketer with a higher hourly rate when it hit specified sales targets.
In 2010, federal rules took effect prohibiting banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers affirmatively opt in. If consumers don't opt in, banks may decline the transactions because of insufficient or unavailable funds, and can't charge an overdraft fee.
The Bureau found that Santander marketed its overdraft service deceptively during telemarketing calls and enrolled consumers in overdraft service without their consent in violation of the opt-in rule. For example, during numerous telemarketing calls, call representatives did not ask the consumers if they wanted to opt in but enrolled them anyway. The Bureau found Santander Bank's illegal and improper practices included:
•Signing consumers up for overdraft service without consent;
•Deceiving consumers that overdraft service was free;
•Deceiving consumers about the fees they would face if they did not opt in;
•Falsely claiming the call was not a sales pitch;
•Failing to stop its telemarketer's deceptive tactics;
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices, or other violations of federal consumer financial law. Santander Bank violated the Electronic Fund Transfer Act and the Dodd-Frank Act. The CFPB's order requires that Santander Bank:
•Validate all opt-ins associated with the telemarketer;
•Not use a vendor to telemarket overdraft service: Santander is prohibited from using a vendor to conduct outbound telemarketing of overdraft service to consumers;
•Increase oversight of all third-party telemarketer;
•Pay a $10 million penalty.
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