A Texas bank has settled with the Consumer Financial Protection Bureau over allegations it failed to stop payments or resolve errors.
San Antonio-based USAA Federal Savings Bank must pay a $12 million fine and $3.5 million in restitution over violations of the Electronic Fund Transfer Act and Regulation E. The bank failed to properly honor consumers’ stop payment requests on preauthorized electronic fund transfers “on numerous occasions prior to 2015”, the bureau said in its consent order.
It also failed to initiate and complete reasonable error resolution investigations, the bureau said. Until May 2016, USAA lacked a procedure requiring that a reasonable error resolution investigation occur whenever a consumer notified the bank about a suspected error regarding an EFT.
Up to that time, USAA “routinely failed to conduct a reasonable review of all relevant information within its own records” before making a determination of error. In numerous instances when USAA found no error, a reasonable review of all relevant information within the bank’s own records would have resulted in a determination in favor of the consumer, the CFPB said.
USAA also violated the Consumer Financial Protection Act of 2010 by reopening deposit accounts consumers had previously closed without seeking prior authorization or providing adequate notice.
Until November 2016, when USAA received certain types of debits or credits to accounts previously closed by the account holders, it reopened the accounts without obtaining consumers’ prior authorization and providing timely notice that the accounts had been reopened. This occasionally resulted in negative balances, potentially incurring fees.
The bank reopened 16,980 closed accounts without obtaining consumers’ prior authorization and providing timely notice. This over a period from July 21, 2011 to Nov. 1, 2016, the bureau said.
Of those accounts, 5,118 incurred fees from USAA totaling an estimated $269,365 as a result of the account reopening. The bank reimbursed these 5,118 consumers a total of $270,521, which included the amount of the fees plus interest, in July 2017.
Besides the fine and restitution, USAA must also submit a compliance plan for CFPB approval that ensures its stop payment, error resolution, and deposit account re-opening practices comply with relevant laws and the consent order.