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Regulation and Compliance > Litigation

Bank of America Sued Over Unauthorized Accounts, Fees

By Dinah Wisenberg Brin

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What You Need to Know

  • BofA opened bank accounts without customers' knowledge and then then charged penalties for failing to maintain minimum balances or pay required fees, a new lawsuit says.
  • Sales pressure and incentives prompted employees to open accounts, according to the suit.
  • The lawsuit follows, and references, a recent $250 million settlement BofA reached with U.S. regulators.

A putative class action lawsuit filed Thursday seeks damages from Bank of America for allegedly opening accounts without customers’ knowledge and then charging penalties for failing to maintain minimum balances or pay required fees.

The complaint, filed in U.S. District Court in North Carolina, came days after BofA agreed to pay $250 million under a settlement agreement with federal regulators — $150 million in fines and $100 million to customers — for improperly charging extra fees, withholding rewards and opening unauthorized credit-card accounts.

The bank neither admitted nor denied the regulators’ allegations.

The lawsuit, which references the settlement, seeks damages for BofA banking customers who had unauthorized accounts opened for them from Jan. 1, 2012, through Dec. 31, 2022.

“BoA’s customers have been discovering an alarming fact: that their bank, the second largest bank in the country, had inexplicably opened accounts for them without their authorization or knowledge,” the complaint reads.

“It recently came to light that, in order to maximize the number of products sold, and thus maximize BoA’s profits, BoA routinely — and shockingly — opened consumer accounts for products without the consumer’s authorization or knowledge.

“Then, when customers fail to maintain mandatory account balances or pay fees for accounts that they did not know existed, BoA charges the consumer penalties and/or other fees,” the complaint alleges.

BofA also profited from opening unauthorized accounts “by being able to artificially inflate their ‘new accountholder’ statistical metrics on their Securities and Exchange Commission reporting,” the lawsuit says.

The complaint cites the Consumer Financial Protection Bureau, which levied fines and penalties against BoA this month “for this exact conduct,” as saying BoA’s employees were driven to open these accounts in response to sales pressure or to obtain incentive awards.

Because of these practices, “consumers suffered substantial concrete damages through fees charged, impacts to credit consumer profiles, the loss of control over personally sensitive and/or identifiable information,” and by spending time and effort to dig into what happened, close the accounts and watch for future harm, the complaint says.

The named plaintiff in the case, Ohio resident Nadine Ballard, learned in March this year that BofA had opened an unauthorized credit card in her name, which forced her to correct her credit report and lodge complaints with government agencies, the suit says.

BofA knew its employees routinely opened unauthorized accounts and made efforts to conceal it, the lawsuit alleges.

In its consent order this week, the CFPB said BofA had violated federal truth in lending, fair credit and consumer financial protection laws through various practices and activities, including opening credit card accounts for consumers without consent and obtaining credit reports on individuals without a permissible purpose.

BofA had no comment on the lawsuit but pointed to certain items in the CFPB order, including a comment from the bureau that, in reference to opening unauthorized credit card accounts, “these acts or practices were contrary to (BofA’s) policies and procedures and involved a small percentage of (its) new accounts.”

The bank also cited the CFPB’s comment that BofA “has addressed a root cause of Relevant Account-Opening Practices — individual sales goals and sales-based compensation — by eliminating sales goals both for compensation incentives and for performance management for financial center employees primarily responsible for the sale of consumer credit card accounts as of January 1, 2023.”

Credit: Adobe Stock

Dinah Wisenberg Brin

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