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CFPB Takes Action Against M&T Bank for Deceptive Advertising of Free Checking


The Consumer Financial Protection Bureau (CFPB) has started to take action against banks for deceptive practices on deposit accounts. On Thursday the CFPB took action against M&T Bank for deceptively advertising free checking accounts. The full CFPB press release is available here. Thanks to DA member Shorebreak for posting on this news in the DA forum. According to the CFPB:

M&T lured in consumers with promises of "no strings attached" free checking, without disclosing key eligibility requirements. When consumers failed to meet the requirements, M&T automatically switched them to checking accounts with fees.

This resulted in a total of $2.9 million in monthly maintenance fees during the period in which CFPB reviewed (from Jan. 1, 2009 to Sept. 25, 2012). CFPB issued an order to M&T to refund $2.9 million to consumers, update credit reports in the cases where M&T closed an account due to a negative balance, end all deceptive advertising and pay a $200,000 fine.

In the press release, the CFPB made the following statement:

Banks and credit unions are prohibited from deceptively advertising deposit accounts. If an account is described as free or no cost, it cannot, for example, have any maintenance or activity fees, or any fees to deposit, withdraw, or transfer money.

My Take

This is a good sign for those worried about potential deceptive practices of banks and credit unions in regard to CDs. An important concern for savers with CDs is that a bank won’t honor the early withdrawal penalty rules that were in effect when the CD was opened. We have seen two cases in which credit unions have increased the early withdrawal penalty on existing CDs. Even though the NCUA ruled in favor of one of the credit unions, I think such practices can be considered deceptive for similar reasons as CFPB’s rulings against M&T. Hopefully, these types of actions by the CFPB will encourage banks and credit unions to ensure their dealings on all deposit products, including CDs, are in no way deceptive.

If you think a bank or credit union has done something deceptive, and the institution won’t work with you to resolve the issue, you may want to submit a complaint with the CFPB. This can be done starting at the CFPB "Submit a Complaint" page for "bank account or service". According to this page:

You can submit a complaint about products or services offered by a bank or credit union. These complaints can be about opening an account, accessing money, fees, or other issues. They can also be about debit cards that draw from your account.

This "Submit a Complaint" page also describes what will happen when you submit a complaint:

We’ll forward your complaint to the company and work to get a response. After we forward your complaint, the company has 15 days to respond to you and the CFPB. Companies are expected to close all but the most complicated complaints within 60 days. You’ll be able to review the response and give us feedback. If we find that another agency would be better able to assist, we will forward your complaint and let you know.

As stated above, the CFPB could forward your complaint to another agency. This might be one of the primary regulators of the institution. For banks, this might be the FDIC, the Federal Reserve or the OCC. For credit unions, this might be the NCUA or a state regulator. The OCC has a webpage "Who Regulates My Bank" to help you determine the regulator.

Related Pages: M&T Bank, checking account

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cumulus   |     |   Comment #1
The CFPB is also trying to increase full disclosure of complaints
it deals with; if you can support this effort please take a quick
minute to add you voice to this effort here.
Anonymous   |     |   Comment #2
When your bank's name is M&T (pronounced empty) bad things will happen! Seriously, bankers spend inordinate amounts of time discussing "fee generation" strategies. It's the hidden cost of banking that's a true profit center. Balance fees, late fees, transfer fees, live teller fees, report fees, and pay toilets are all up for discussion at these weekly meetings. Deception is, unfortunately, the name of the game.    
Anonymous   |     |   Comment #3
Oh really?  Hmmmmm......Do you work for free? Don,t charge for your labor?  Your company does not care about profit?  I'm sick of this........Any business.....including "Evil Big Banks" have a right to charge whatever fees they want......They are in business and are not non-profits. If you dont like it I guess you should start your own bank.
Anonymous   |     |   Comment #4
Nobody is against the fees, but they must be disclosed clearly upfront
and not in some hidden fine print disclosure you have to search for it to find it, furthermore, you can not say free checking account but attach conditions later or change the terms after the account is opened, they must be grandfathered in.
Anonymous   |     |   Comment #6
It seems everyone is against reading. Most smart-money people and pfbloggers know about all the conditions and all the details of the offer, and all of the fees involved before they open a new account.
me1004   |     |   Comment #5
Uh, Anonymous, I don't invest for free -- and even so, they are not working for free at all, they are working for a hefty profit without any fees on me! They owe me, not the other way around. They can't make a dime without, for all intents and purposes, partnering with me to supply the cash to do so.

They make a LOT iof money off my deposits -- that is the business model. They get money from me at a certain rate, and they turn around the lend it to a borrower at a good 3% mark up (for a mortgage, or even more for other things such as credit cards). That is a very hefty profit.

They make that profit whether I'm getting 1% on my deposit or 5% -- or zero percent in a checking account. Mortgage rates in a normal environment are more like 8%. Other lending rates can bee substantially higher. 

I do not expect to be getting 1% on my deposit, and have them take fees that might even amount to more than that -- and especially not when they scream up front that the account is a no-fee account.
Anonymous   |     |   Comment #10
#5-Banks' business plan is actually none of your business...They are in business to make a profit....and they can charge whatever rates/fees the market allows. Besides....all kinds of companies charge big markups.....I'm sick of banks being the ones that get all the hate.....Some of the worst abusers are your dear friends at colleges and universities jacking up tuition, Should we call them "Big Colleges"? "Evil Universities"?