FOR IMMEDIATE RELEASE:August 12, 2015
CONTACT:Office of CommunicationsTel: (202) 435-7170
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.
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FOR IMMEDIATE RELEASE:
August 12, 2015
CONTACT:Office of CommunicationsTel: (202) 435-7170
CONSUMER FINANCIAL PROTECTION BUREAU ORDERS CITIZENS BANK TO PAY $18.5 MILLION FOR FAILING TO CREDIT FULL DEPOSIT AMOUNTS
CFPB, OCC, and FDIC Take Action Against Bank For Ignoring Deposit Discrepancies
WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) took action against Citizens Bank for failing to credit consumers the full amounts of their deposited funds. The bank kept money from deposit discrepancies when receipts did not match actual money transferred. Today’s CFPB consent order requires the bank to provide approximately $11 million in refunds to consumers and pay a $7.5 million penalty for the violations.
“Citizens Bank regularly denied customers the full credits of their deposits when there were discrepancies between deposit slips and the actual money transferred into the bank,” said CFPB Director Richard Cordray. “The bank chose to ignore these discrepancies and harmed many consumers by pocketing the difference.”
Today’s CFPB action is against Citizens Bank, N.A., formerly known as RBS Citizens Bank, N.A.; Citizens Financial Group, Inc., formerly known as RBS Citizens Financial Group, Inc.; and Citizens Bank of Pennsylvania. The bank operates retail branches in about a dozen states and among its various products and services are deposit accounts. For the period at issue, the bank generally required its customers making a deposit to fill out a slip listing the checks or cash being deposited, and their total. The customer then turned the deposit slip over to the bank and got a receipt reflecting the amount on the deposit slip for the transaction. The bank scanned the deposit slip and deposit items at a central location.
The CFPB investigation found that from January 1, 2008 to November 30, 2013, Citizens Bank violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on unfair and deceptive practices by failing to properly credit consumers’ checking and savings accounts. In cases where the bank’s scanner misread either the deposit slip or the checks, or if the total on the deposit slip did not equal the total of the actual checks, Citizens Bank did not take action to fix the mistake if it fell below a certain dollar amount. Over the years, by ignoring the discrepancies the bank shorted consumers millions of dollars. Specifically, Citizens Bank:
- Failed to credit consumers the full amount of their deposits: Citizens Bank frequently did not give consumers full credit for their deposits when the amount scanned on the deposit slip was less than the amount of the checks and cash deposited. The bank credited the consumer’s account with what was read on the deposit slip, not the actual sum of money the consumer transferred into the bank. Citizens only investigated and fixed errors when they were above a certain threshold. From January 2008 to September 2012, the bank only looked into discrepancies greater than $50. From September 2012 to November 2013, the bank only looked into discrepancies greater than $25.
- Falsely claimed that it would verify deposits: Citizens Bank told consumers that deposits were subject to verification, implying that the bank would take steps to ensure consumers were credited with the correct deposit amount. But the bank’s practice was not to verify and correct deposit inaccuracies unless they were above the $25 or $50 threshold. Although some consumers benefited by this policy, others lost money that rightfully belonged to them. The CFPB concluded that many of those consumers were harmed by this unfair and deceptive practice.
Enforcement ActionUnder the Dodd-Frank Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. Today’s order requires Citizens Bank to:
- Pay approximately $11 million in redress to victims: Citizens Bank must pay $11 million to consumers who did not receive all the money that should have been deposited into their accounts. Citizens Bank must include any fees the consumer incurred related to the under-crediting, including but not limited to any overdraft fees, insufficient funds fees, and monthly maintenance fees. The bank must also include a reasonable estimate of interest on these amounts. Consumers are not required to take any action to receive their credit or check. If the consumers have an open account with the bank, they will receive a credit to their account. For closed accounts, Citizens Bank will send a check to the affected consumers.
- End all violations of federal consumer financial law in connection with deposit discrepancies: Citizens Bank is prohibited from engaging in violations of unfair, deceptive, and abusive acts or practices in connection with deposit transactions. Among other things, this means the bank must properly review its compliance management system to ensure no further violations relating to its processing of deposits, it must not misrepresent its processing practices, and it must incorporate corrective actions if the bank fails to process deposits consistent with federal consumer financial law. The bank has made a significant technology investment over the past year to address the issue.
- Pay $7.5 million civil penalty: Citizens Bank will make a $7.5 million penalty payment to the CFPB’s Civil Penalty Fund.
The CFPB is taking this action in coordination with the FDIC and the OCC. The FDIC separately ordered Citizens Bank of Pennsylvania to pay restitution and a $3 million civil penalty. The OCC separately ordered Citizens Bank, N.A., to pay restitution and a $10 million civil penalty. In total, Citizens Bank must pay about $11 million in consumer refunds and $20.5 million in federal penalties for these coordinated actions. As part of these actions, the FDIC and OCC are ordering additional relief relating to business accounts.
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