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First Niagara pays $2M UDAP penalty for overdraft fees

Buffalo, NY
09/06/2016
Fine Amount: 
$2 million
Penalty Type: 
Issued by: 

The Office of the Comptroller of the Currency has issued a Consent Order for a Civil Money Penalty of $2 million in the matter of First Niagara Bank, N.A., Buffalo, NY.

The OCC identified "deficiencies in the Bank’s practices that resulted in a violation of Section 5 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 45(a)(1), related to the calculation of overdraft and non-sufficient funds fees (collectively “overdraft fees”)." The order indicates the bank in 2012 and 2013 issued deceptive, inaccurate deposit account disclosures related to the calculation of overdraft fees, and the disclosures remained in effect until February 2015.

The disclosures were inaccurate "because they stated only that the Bank would subtract deposited funds that were not yet available for withdrawal from the ledger balance to obtain the adjusted balance used to determine whether an overdraft fee was charged. However, the Bank’s actual practice was to (i) also subtract funds for must-pay items – items that had been authorized but not yet presented to the Bank (and thus, not yet paid) – from the account’s ledger balance; and (ii) if insufficient funds remained after that additional subtraction to pay the items presented, to then impose Overdraft Fees." This was deemed a deceptive practice by the OCC.

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