TCF Bank tricked customers into expensive overdrafts, federal agency says

The Wayzata-based bank is accused of obscuring overdraft fees and failing to explain they were optional.
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TCF Bank is in trouble with federal regulators, who are suing the Minnesota company for "tricking" customers into what it called "costly overdraft services."

The Consumer Financial Protection Bureau announced the suit on Thursday, accusing TCF of designing its application process in a way that obscured overdraft fees and made an overdraft seem mandatory in order to open a new account.

It also claims TCF adopted a "loose definition of consent" that effectively placed its existing customers into the overdraft service, and "pushed back on any customer who questioned the process."

Bureau Director Richard Cordray said TCF was "tricking consumers ... to preserve its bottom line," adding: "TCF bulldozed its way through protections against automatic overdraft enrollment and then celebrated its unusual sign-up success."

TCF Bank, which is based in Wayzata, issued a statement Thursday saying, "Although we remain hopeful that we can reach an appropriate resolution, TCF intends to vigorously defend against the CFPB’s complaint. 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."

In December, TCF Bank topped the CFPB's list of the most complained about banks in America.

Suit claims bank offered bonuses for sign-ups

The suit says that customers with TCF checking accounts would be charged $35 every time they overdrafted by spending/withdrawing more than was in their account.

In 2010, federal laws took effect that banned banks from charging overdraft fees on ATM and one-time debit card transactions unless consumers – new and existing – agreed to opt in to the program. (If a consumer didn't opt in, the transaction would be blocked if there wasn't enough money in the account.)

But TCF, expected to take a $182 million revenue hit as a result of the new rules, found "the less information it gave consumers about opting in, the more likely consumers would opt in," according to the financial bureau's suit.

TCF did this, the bureau argues, by:

  • placing the "opt in" decision immediately after a series of other mandatory decisions a customer had to agree to;
  • giving staff scripts that didn't explain that the opt in was optional;
  • and failing to spell out to existing customers that they faced a $35 overdraft charge by keeping their account the way it is.

The CFPB's complaint also alleges bonuses were offered to branch staff who got consumers to sign on, with branch managers being able to rake in up to $7,000 in bonuses for getting a high number of opt-ins during 2010.

Even when bonuses were phased out, regional managers would set targets for staff, who believed (wrongly) they would lose their jobs if they didn't achieve them.

TCF Bank, in its response, says the CFPBs claims are contradicted by the fact some of its customers opened accounts online with no face-to-face interaction, and still 60 percent signed up for the overdraft charges.

It also says there were "virtually no complaints" – 341 between 2010-2015 – from its customers relating to their decision to opt-in.

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