Three government agencies recently settled claims against Citizens Bank (formerly Charter One Bank in Michigan). The financial institution had resolved five years of deposit discrepancies in the company’s favor – pocketing customers’ money in violation of federal law.

The Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) each filed a complaint against Citizens Bank recently claiming it had violated federal consumer protection laws in the way it resolved deposit discrepancies. Here’s how it worked.

Imagine you took a check to the bank to deposit. The check was for $354 but you mistakenly wrote $345 on your deposit slip. Then you handed over the check and the deposit slip to the teller. The teller used a device that read the deposit slip and credits your account with the amount indicated: $345. You received a receipt indicating $345 had been deposited into your account.

But then, the bank processed the check and received $354. What did Citizens Bank do with the extra $9?

Citizens Bank told consumers that deposits were “verified” – implying that the bank would make sure the extra funds went back to you. In fact, until September 2012, no discrepancies less than $50 were corrected. At that point, the threshold dropped to $25, but that still wouldn’t help you get your $9 back into your account.

Instead, Citizens Bank was holding on to that money itself. Between January 2008 and November 2013 the bank had accumulated approximately $11 million in deposit discrepancy funds.

Now, under the Dodd-Frank Act of 2012 and the Federal Trade Commission Act, Citizens Bank is going to have to pay it all back. Customers with open Citizens Bank accounts should look for deposits from the bank to resolve the discrepancies. Customers who have closed their accounts will receive checks in the mail. The bank will also have to pay any overdraft fees, penalties, or interest connected to the missing funds.

On top of that, the bank will pay fines to each of the three regulatory agencies for violating important consumer protection laws. All together, Citizens Bank will have to pay:

  • $7.5 million in penalty payments to the CFPB’s Civil Penalty Fund;
  • $3 million in civil penalties to the FDIC; and
  • $10 million in penalties to the OCC.

Consumers shouldn’t worry about their current Citizens Bank accounts, though. The bank issued a statement saying:

“Our implementation of a new teller system in the fourth quarter of 2013 has automated this reconciliation process, and we believe our process is now considered among the best in the industry.”

When financial institutions use this kind of “sloppy banking” it’s up to consumer protection attorneys to hold them accountable. Dani K. Liblang of The Liblang Law Firm, P.C., has been representing consumers against financial institutions for 30 years.  If you have consumer rights questions, contact The Liblang Law Firm, P.C., today for a free consultation.

Dani Liblang

Author Dani Liblang

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