It unlawfully froze customer accounts, charged garnishment fees, garnished funds, and sent payments to creditors based on out-of-state garnishment court orders that should have been processed under the laws and protections of the states where the consumers lived, the Consumer Financial Protection Bureau said in a statement.
Bank of America also violated the law by putting unenforceable language into customer contracts that said it would limit customers’ rights to challenge garnishments. The CFPB’s order requires Bank of America to refund or cancel fees from unlawful garnishments, and reform its system for processing garnishments.
“Bank of America imposed unlawful garnishment fees and injured its customers by inserting unenforceable clauses into contracts in an attempt to strip legal rights from families,” said Rohit Chopra, director of the CFPB. “The CFPB is ordering Bank of America to fix its systems, clean up its contracts, and make its victims whole.”
Bank of America, the second largest bank in the United States, has about 4,100 branches and 16,000 ATMs. In 2014, the CFPB ordered the bank to pay $727 million to return money to its victims for illegal credit card practices.
Garnishments occur when a creditor takes part of an individual’s paycheck, or money from their bank account, to collect a debt. Most garnishments occur following court orders. State laws have exemptions for bank account and paycheck garnishments that are usually designed to make sure people have money left to live on following garnishment.
Since August 1, 2011, Bank of America unlawfully garnished at least 3,700 out-of-state accounts, and the customers whose accounts were garnished have paid at least $592,000 in garnishment fees. In addition to the $592,000 in unlawful fees, the company harmed consumers by:
- Deceiving customers about their rights.
- Imposing unenforceable clauses in take-it-or-leave-it customer contracts.
- Failing to adhere to consumer protections on customers’ bank accounts.