Prepared Remarks of Richard Cordray Director, Consumer Financial Protection Bureau
Citizens Bank Enforcement Action
WASHINGTON, D.C. (August 12, 2015) — Thank you for joining this call. Today the Consumer Financial Protection Bureau, along with our federal partners, is taking action against Citizens Bank for shoddy practices that deprived consumers of money that was rightfully theirs when they made deposits into their checking and savings accounts. The Consumer Bureau is ordering the bank to return approximately $11 million to harmed consumers and pay a $7.5 million fine.
Checking accounts are an important part of financial life for some 200 million Americans, which makes them one of our most widely used financial products. They function as a basic tool for money management. They are also supposed to provide a secure way for consumers to collect earnings, make payments, and transfer and hold funds. But when a depository institution violates the basic tenet of what it means to offer a deposit account – that is, to receive and keep safe the customer’s funds – it imbues a deep sense of mistrust.
When consumers deposited their money into Citizens Bank, they trusted that all of their money would go into their accounts. But our investigation found that Citizens regularly denied some customers the full credits of their deposits. Customers making a deposit filled out a deposit slip listing the checks or cash that they believed were going into their accounts. They then turned the deposit slip over to the bank teller and got a receipt for the transaction. The bank took those deposit slips and scanned the deposit items at central locations.
But in cases where the bank’s scanner misread either the deposit slip or the checks, or if the total on the deposit slips did not equal the total amount of the actual checks or cash, Citizens did not take appropriate action to fix those mistakes even when it became aware of them.
Instead, the bank ignored discrepancies if they fell below a certain dollar amount – which at times was as high as $50. One could argue that it all came out in the wash – some consumers benefited by this policy and some were harmed by it. But for those customers who were harmed, the bank kept the difference, and over the years shorted consumers millions of dollars. We believe this practice was unfair and deceptive.
The inconsistencies had various causes. Perhaps the customer incorrectly added up the deposits, or perhaps the bank’s scanners did not capture the image of the correct amount on the deposit slips or checks. Either way, consumers lost money that rightfully belonged to them.
In its account disclosures, Citizens Bank told its customers that all deposits were subject to verification and the bank would take steps to ensure that consumers were credited with the correct amounts. But this was not true. For almost five years of the period covered by our order, the bank only investigated and corrected errors that exceeded $50. For the last year, it only reviewed discrepancies above $25. In other words, if the bank read the customer’s deposit slip as totaling $100, but the customer had actually deposited $150, the bank took the $50 difference for itself without ever informing the customer about what it had done.
The bank may have seen these discrepancies as “rounding errors” not worth its time to pursue. But that is not sufficient. Even though some customers may have benefited from the policy in different circumstances, that fact did not nullify the harm to others. This is sloppy banking, and it violates the Dodd-Frank Act, which prohibits financial providers from engaging in unfair or deceptive practices.
So today, we are ordering the bank to return about $11 million to consumers who did not receive money that should have been deposited into their accounts. And we are ordering Citizens Bank to pay a $7.5 million penalty as well. In addition, we are ordering the bank to change the way it collects deposits so that consumers will not have this problem in the future. The bank has made a significant technology investment over the past year to address the issue.
This is the first action the Bureau has taken involving illegal practices in connection with deposit processing. The whole premise of the banking system is built on the basic trust that when you give your money to the bank, the bank will hold that money safely for you. It was not acceptable for Citizens to keep money for itself when errors were made. Fifty dollars may seem like a small amount to a bank with assets worth billions of dollars, but it is real money to regular people. Consumers deserve to have confidence that they can move their money around securely without exposing themselves to unwelcome risks, such as a bank resolving an error by keeping the difference for itself.
I would like to thank our federal partners, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, for their close coordination with us to address this issue and work with the bank to develop a robust restitution program for consumers. We will continue to take appropriate action against those we find to be deceiving or taking advantage of consumers. Thank you.
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.