This week the Consumer Financial Protection Bureau levied a significant fine on Citizens Bank for mishandling discrepancies in customer deposits. The CFPB joined the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency in the joint enforcement action. The consent order can be found here.
The CFPB alleges that Citizens ignored deposit discrepancies if they fell below a certain amount, sometimes as high as $50. When the credited amount was lower than the actual amount of the deposit, Citizens kept the difference for themselves. The inconsistencies had various causes, such as customers incorrectly adding up deposits on their deposit slips or the bank’s scanners capturing the wrong amount on deposit slips and checks. Many of the discrepancies were for very small amounts, but over several years from 2008 to 2013 they added up to millions of dollars. At least 475,000 accounts were affected, according to the CFPB.
“Citizens Bank regularly denied customers the full credits of their deposits when there were discrepancies between deposit slips and the actual money transferred into the bank,” said CFPB Director Richard Cordray. “The bank chose to ignore these discrepancies and harmed many consumers by pocketing the difference.” Cordray noted that the CFPB learned of the issue from a whistleblower.
Citizens will pay at least $11 million in consumer refunds, $3 million in refunds to businesses, plus some $20.5 million in civil penalties for a total cost of about $35 million. The refund portion is expected to rise after the Office of the Comptroller of the Currency presents its final tally. Citizens has also been ordered to alter its policies across all of its branches in 12 states.
Citizens is neither admitting or denying wrongdoing and said it is working with regulators to compensate customers quickly. In a statement, the bank said it used certain practices to “ensure the next-day crediting of deposits in situations when deposit slips contained mathematical errors. However, these past practices could have been better.” In addition to under-crediting customers, the bank said the errors on the deposit slips also sometimes over-credited some depositors. Customers who were over-credited will keep the additional funds and those who were under-credited will be reimbursed, according to the bank statement.
Significantly, this is the first time the CFPB has penalized a financial institution for its processing practices, rather than its lending practices. Cordray indicated other banks could be in the crosshairs. “If we identify additional violations at other institutions, we will take appropriate action,” he said.