Last week the CFPB announced a consent order with M&T Bank alleging that M&T deceptively advertised checking accounts as “free” or “no strings attached” without disclosing in its ads a requirement that accountholders would be automatically switched to accounts that carried a fee if they failed to maintain minimum account activity. According to the consent order, from 2009 to 2012, M&T assessed approximately $2.9 million in monthly maintenance fees and collected approximately $2 million of these fees from about 59,000 consumers. M&T will refund the fees collected, reduce charged-off balances reflecting the remaining fees assessed, and pay a relatively low civil monetary penalty of $200,000.
The M&T order targets the way the bank advertised its free checking accounts. M&T did disclose its minimum activity requirement and automatic conversion feature to customers at the account opening, but its ads described the accounts as free of monthly service charges or balance requirements without mentioning these features. The bank was also faulted for allegedly failing to adequately notify customers that their free checking accounts had been converted because the only indication of the switch was that the new account name, “M&T First,” would appear on the customer’s account documents. The Bureau found that M&T engaged in deceptive acts or practices under sections 1031(a) and 1036(a)(1)(B) of the CFPA and violated Regulation DD, 12 C.F.R. § 1030.8(a)(1)-(2), which prohibit misleading advertising in connection with deposit accounts and, specifically, advertising an account as “free” or “no cost” if a maintenance or activity fee may be imposed.
As MoFo partner and former CFPB official Leonard Chanin told the Wall Street Journal last week, the order “clearly indicates that the Bureau is willing to apply strict standards in its review of deposit products.” It is worth noting, however, that this consent order does not challenge dormant account fees themselves or the conversion to a higher-cost account due to inactivity, or M&T’s account opening documents. This time, at least, the issue was not that there were strings attached to these accounts, but that customers were not sufficiently alerted to them.