Santander Bank has agreed to pay $10 million for illegal overdraft practices.
Santander’s telemarketing vendor deceptively sold an overdraft service and signed some bank customers up for it without their consent, the Consumer Financial Protection Bureau said Thursday.
In addition to paying the penalty, Santander is required to go back and give consumers the opportunity to agree to overdraft service, not use a vendor to telemarket its overdraft service, and increase oversight of vendors it uses to telemarket financial products or services.
“Santander tricked consumers into signing up for an overdraft service they didn’t want and charged them fees,” said Richard Cordray, director of the bureau. “Santander’s telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service.”
Other illegal activities by Santander included telling consumers the overdraft service was free, deceiving consumers about the fees they would face if they didn’t opt in, claiming falsely the call wasn’t a sales pitch, and failing to stop its telemarketer’s deceptive tactics.
Santander operates nearly 700 branch offices in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island. It offers overdraft service with its checking accounts. An overdraft occurs when consumers spend or withdraw more money from their checking accounts than is available.
From 2010 to 2014, Santander marketed and enrolled consumers in its “Account Protector” overdraft service for ATM and one-time debit card transactions, and charged consumers $35 per overdraft. Santander used a telemarketer to call consumers to persuade them to opt in to the overdraft service and rewarded the telemarketer with a higher hourly rate when it hit specified sales targets.
In 2010, federal rules took effect prohibiting banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers opted in. If consumers didn’t opt in, banks could decline the transactions because of insufficient or unavailable funds and couldn’t charge an overdraft fee.
