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From Banking and Finance Law Daily, July 14, 2016

Bank gets slapped for marketing its ‘SAP’

By John M. Pachkowski, J.D.

Santander Bank, N.A. has agreed to pay a $10 million fine to the Consumer Financial Protection Bureau for its overdraft service practices. The bank offered the Santander Account Protector, or "SAP," which provided overdraft service for ATM and one-time debit card transactions for $35.00 per overdraft.

"Opt-In Rule." Beginning in July 2010, banks, like Santander, were prohibited from charging overdraft fees on ATM and one-time debit card transactions unless consumers affirmatively opted in to the overdraft service. If a consumer did not opt in, banks may decline the transactions because of insufficient or unavailable funds, and can’t charge an overdraft fee. This "Opt-In Rule" was originally established by the Federal Reserve Board which noted, at the time, that many consumers did not understand they could be charged overdraft fees for using their debit card. The Opt-In Rule also required financial institutions to disclose any overdraft fees they will charge.

Marketing practices. In its consent order, the CFPB found that in "order to protect its fee revenue," Santander "needed to persuade its customers to opt in" to the SAP. To increase enrollment in SAP, Santander launched a series of "vigorous telemarketing campaigns" using a telemarketing vendor.

The bureau further found that the bank enrolled consumers in overdraft service without their consent in violation of the Opt-In Rule. For example, during numerous telemarketing calls, call representatives did not ask the consumers if they wanted to opt in but enrolled them anyway. Other conduct associated with the telemarketing campaigns that were problematic included deceiving consumers as to the costs and fees of the SAP; falsely claiming the call was not a sales pitch; and Santander’s failure to stop its telemarketer’s deceptive tactics.

Taking all these activities into consideration, the CFPB concluded that the bank violated the Dodd-Frank Act’s prohibition on engaging in unfair, deceptive, or abusive practices, as well as the Electronic Fund Transfer Act.

Redress. Beside the fine, Santander is also:

  • required to validate all opt-ins associated with the telemarketer;
  • prohibited from using a vendor to conduct outbound telemarketing of overdraft service to consumers; and
  • increase oversight of all third-party telemarketers.

Commenting on the enforcement action, CFPB Director Richard Cordray noted, "Santander tricked consumers into signing up for an overdraft service they didn’t want and charged them fees." He added, "Santander’s telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service. We will put a stop to any such unlawful practices that harm consumers."

Companies: Santander Bank, N.A

MainStory: TopStory CFPB ChecksElectronicTransfers CreditDebitGiftCards DoddFrankAct EnforcementActions UDAAP

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