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Prepared Remarks of CFPB Director Richard Cordray on the TCF Bank Enforcement Action Press Call

Washington, D.C.

Thank you for joining the call. Today, we are suing TCF National Bank for tricking consumers to opt in for costly overdraft services. We believe TCF trained its employees to use unlawful tactics in their marketing to consumers. They made overdraft seem mandatory when it was not. They obscured information about fees when opening accounts for new customers. They adopted a loose definition of “consent” to opt in existing customers, and they pushed back aggressively against any customer who questioned the process. In the end, many of their customers had no idea they had opted in for expensive services that exposed them to high fees.

For as long as we have had banks, consumers have occasionally run into trouble by spending more money than they have in their accounts. For many years, banks and credit unions either covered the difference temporarily as a courtesy, in return for payment of an overdraft fee, or they would refuse the transaction and generally charge a returned check fee for doing so. With the advent of debit cards, consumers began to use the cards more often for small purchases instead of using cash. As banks and credit unions found themselves processing more and more of these transactions, they developed automated overdraft programs which routinely authorized overdraft transactions and assessed an overdraft fee. Over time, these institutions began to assess higher fees for covering any overages. Accordingly, overdraft became a significant source of revenue from checking accounts. 

In 2010, a Federal Reserve Board rule took effect that said banks cannot charge an overdraft fee for ATM withdrawals or most debit card transactions unless the consumer has affirmatively “opted in” to use these services. If the consumer does not opt in, banks may either allow or decline the transaction, but cannot charge a fee if they decide to cover any overage. An opt-in requires affirmative consent from the consumer on each new account. In addition, when the rule took effect it covered existing accounts, so an affirmative opt-in was required for those accounts too.

Minnesota-based TCF Bank relied on overdraft fees more than many other banks, in part because it does not offer as many banking products. Unlike many other banks, TCF does not generate substantial revenue from credit cards and home mortgage loans. Instead it relies more heavily on revenue from its deposit accounts, and a substantial part of that revenue comes from fees. In 2009, TCF estimated that $182 million in annual revenues was at risk because of the new opt-in rule. A substantial portion of this money could have been lost to the bank if consumers had to affirmatively opt in for overdraft – and that obviously raised concerns.

In an effort to preserve its revenue, TCF began consumer testing on how to get consumers to sign up for overdraft services at $35 per transaction. The bank found that the less information it gave consumers about opting in, the easier it was to get their consent. And it found that if consumers were asked to opt in at the same time they were being asked to agree to other mandatory terms and conditions of a new account, the opt-in rate more than doubled.

So for new customers, as described in the lawsuit filed today, the bank placed the opt-in decision immediately after a series of mandatory items that required the consumer’s agreement in order to open the account. The bank then provided branch employees with scripts that failed to explain that opting in was optional or that it amounted to giving the bank permission to charge fees. Most consumers fell into the rhythm of initialing all the various terms of their new account and simply signed on.

For existing customers, the Bureau alleges that TCF directed its employees to use deceitful language to secure opt-ins. Instead of asking consumers whether they wanted to have each of their overdrafts covered for a $35 charge, the bank instructed its staff to ask customers whether they wanted their “TCF Check Card to continue to work as it does today?” Many consumers did not understand that by choosing to have their debit card “continue to work as it does today,” they were granting the bank permission to charge them overdraft fees that they would not otherwise have to pay.

If either new or existing consumers challenged or questioned any of this, the bank instructed its staff to suggest a hypothetical situation in order to sell the product. One scenario, for example, would be a high-stakes emergency where people would desperately need access to money, like a broken-down car on the side of the road in a Minnesota winter. And, as alleged in the complaint, the bank discouraged employees from using hypotheticals that highlighted the risks of opting in, which gave consumers a distorted sense of the value of opting in.

TCF employees had a sizeable stake in extracting such “consent.” When the new federal rule first took effect, the bank offered bonuses to branch staff that secured consumer opt-ins. For example, managers at the larger branches could earn up to $7,000 in bonuses for getting more consumers to sign on. We believe, however, that even after these bonuses were phased out, certain regional managers instituted their own opt-in goals for branch employees. While the bank’s official policy was that an employee could not be terminated for low opt-in rates, many employees still believed they could lose their job if they did not meet their sales goals. By linking opt-in rates with an employee’s performance goals instead of consumer preference, the bank instituted a culture of pushing consumers into overdraft services.

The upshot was that by mid-2014, about 66 percent of TCF’s customers had opted in, a rate that was more than triple the average opt-in rate at other banks. Among the telling details alleged in the Bureau’s complaint is the fact that the bank’s CEO even named his own pleasure boat the “Overdraft.” TCF’s senior executives were so enthusiastic about their unusually high numbers that they threw parties to celebrate when they reached various milestones.

In its complaint, the Consumer Bureau alleges that TCF’s practices have violated the Electronic Fund Transfer Act and the Consumer Financial Protection Act of 2010. The lawsuit filed today seeks redress to make consumers whole, injunctive relief to stop these unlawful practices, and civil money penalties as deemed appropriate.

Opting in for overdraft coverage is an expensive way to manage a checking account. It is therefore important for consumers to understand they have a choice and make an affirmative decision to be charged these overdraft fees. The right way to get agreement from consumers is by describing the service fully and accurately and affording consumers a reasonable opportunity to give their affirmative consent.  If this is truly a service that consumers want and value, then they will act accordingly.

But when banks deliberately design ways to pull the wool over the eyes of their customers, the Consumer Bureau is watching carefully. We will not hesitate to take action against any entity that we find to be deceiving or abusing consumers. Consumers deserve better.

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers  to take more control over their economic lives. For more information, visit consumerfinance.gov.