CFPB sues TCF National Bank for overdraft opt-in practices

The Consumer Financial Protection Bureau has announced it brought suit against TCF National Bank, Sioux Falls, South Dakota (per FDIC records -- the CFPB press release lists the headquarters in Wayzata, Minnesota, which is where its holding company is located), for tricking consumers into costly overdraft services. The Bureau alleges that TCF designed its application process to obscure the fees and make overdraft service seem mandatory for new customers to open an account. The CFPB also believes that TCF adopted a loose definition of consent for existing customers in order to opt them into the service and pushed back on any customer who questioned the process. The lawsuit seeks redress for consumers, an injunction to prevent future violations, and a civil money penalty.

As described in the Bureau's complaint, TCF relied on overdraft fee revenue more than most other banks its size and recognized early on that the opt-in rule could negatively impact its business. In late 2009, Bank management estimated that approximately $182 million in annual revenue was “at risk” because of the opt-in rule. Through consumer testing, the bank determined that the less information it gave consumers about opting in, the more likely consumers would opt in.

The Bureau’s complaint alleges that TCF’s strategy also consisted of bonuses to branch staff who got consumers to sign on. For example, in 2010, branch managers at the larger branches could earn up to $7,000 in bonuses for getting a high number of opt-ins on new checking accounts. After the bank phased out the bonuses, certain regional managers instituted opt-in goals for branch employees. Staff had to achieve extremely high opt-in rates of 80 percent or higher for all new accounts. 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.

The Bureau alleges that the bank’s strategy worked and that by mid-2014, about 66 percent of the bank’s customers had opted in, a rate more than triple that of other banks. According to the Bureau’s complaint, the chief executive officer of the bank even named his boat the “Overdraft.” TCF’s senior executives were so pleased with the bank’s effectiveness at convincing consumers to opt in that they had parties to celebrate reaching milestones, such as getting 500,000 consumers to sign up.

The Bureau's complaint alleges that TCF violated the Electronic Fund Transfer Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. TCF National Bank reported total assets of $21 billion as of 9/30/16, with 360 retail branches across Minnesota, Wisconsin, Illinois, Michigan, Colorado, Arizona, and South Dakota.