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Some banks are taking actions that are deceptive and illegal. These illegal actions are known as Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). Many of these affect your credit rating or cost you money.
The National Credit Union Administration says, UDAAP “can cause significant financial injury to consumers, erode consumer confidence, and undermine the financial marketplace.” (1)
Following several high-profile bank cases involving UDAAP, the New York State Department of Financial Services issued an industry letter in July 2022. The letter alerts financial institutions of its intent to evaluate their practices regarding overdraft and insufficient funds fees. (2)
The federal government has many laws regulating banks. Other states, in addition to New York, may also be pursuing this type of action to protect consumers.
Reports on cases involving UDAAP by banks and financial institutions appeared in the media in 2022. One pertains to improper overdraft fees, the other to fraudulent accounts.
A class action lawsuit alleges Trustco Bank broke the law when it charged customers multiple overdraft or insufficient funds fees for a single transaction. Trustco is alleged to have reprocessed individual transactions to charge customers the additional fees. (3) Those insufficient funds fees were pure profit for the bank.
In another highly publicized case, U.S. Bank was fined $37.5 million by the Consumer Financial Protection Bureau (CFPB) for “illegally accessing its customers’ credit reports and opening checking and savings accounts, credit cards, and lines of credit without customers’ permission.” (4) The bank took these actions to boost sales. (5)
These are by no means the only deceptive financial practices consumers may fall victim to.
If you or a loved one have suffered from deceptive bank practices, contact us today to understand your legal rights.Get a Free Case Review
These are other illegal UDAAP you should be aware of:
For these reasons, laws exist to prevent financial institutions from implementing UDAAP. Some of these laws are specifically targeted at overdraft fees.
Overdraft protection is a service where your bank pays a transaction (check or other item) even if you do not have sufficient funds in your account at the time it is processed. The bank then charges you a fee for this service. (14)
In the past, banks charged you a flat fee for each overdraft transaction, even for the slightest infraction. Banks have used that privilege to charge multiple fees for a single transaction. (15)
Because of the excessive use of overdraft fees, Congress enacted the Overdraft Protection Act of 2021 was by. This act prohibits UDAAP and specifies how overdraft fees are to be applied. (16) (17)
A critical piece of consumer protection legislation is the Dodd-Frank Act. It not only made UDAAP illegal for financial institutions, but granted industry rule-making authority to the Consumer Financial Protection Bureau (CFPB). CFPB can take enforcement action, as well as impose fines against offending financial institutions. (18)
Regulation, supervision, and enforcement of consumer protection legislation also involves several other government agencies. Among these are the Federal Trade Commission and the Federal Deposit Insurance Corporation. (19) (20)
The Office of the Comptroller of the Currency also plays a role, since it supervises national banks and federal savings associations. (21)
Despite consumer protection laws, you can still be harmed when financial institutions make multiple hard credit inquiries on your account even though you did not apply for a credit card or a loan. These multiple hard inquiries can lower your credit scores.
More serious harm can be done when your personal information is accessed illegally, then used to open sham accounts. This is what happened in the U.S. Bank case.
Of particular interest is the Fair Credit Reporting Act (FCRA).
FCRA protects your personal information by limiting who can access the information and how it can be used. (22)
Typically, government agencies, lenders, debt collectors, utility companies, landlords, and insurance companies are permitted to access your credit report for specific purposes. For other purposes, your permission is required. (23)
If you have suffered from deceptive bank practices, contact us today for a free case review.Get a Free Case Review
If your credit information has been improperly accessed, or a bank has charged you illegal fees, you should hire an experienced attorney to help you explore your legal options.
An attorney can help put an end to your bank or financial institution’s unfair practices by filing a lawsuit on your behalf.
To win your case, your attorney needs to show the court the bank’s actions were unfair. To qualify as “unfair”, the act must be likely to cause substantial injury, the injury is not reasonably avoidable, and the injury outweighs any benefits. (25)
In most cases, these are class action lawsuits because the bank has also harmed many other individuals. Weitz & Luxenberg is currently filing multiple lawsuits against banks for these types of activities.