Overdraft fees cost consumers an average of $32 billion each year. The hefty fees and their often less-than-transparent policies, which vary greatly between banks and financial products, have long garnered the ire of consumer advocates and federal regulators. Case in point: a Minnesota-based bank is now under investigation for possibly unfair and deceptive practices related to its overdraft program. 

TCF Financial, which operates 376 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona, South Dakota and Indiana, announced in a filing [PDF] with the Securities and Exchange Commission that it may face legal action from the Consumer Financial Protection Bureau.

According to the letter, the Bureau’s enforcement office “is recommending that the CFPB take legal action against TCF related to compliance with laws relating to unfair, deceptive and abusive acts and practices … in connection with TCF’s practices in administering checking account overdraft program ‘opt-in’ requirements.”

Under federal law, banks are required to get a customer’s approval to process debit and ATM transaction that exceed the amount of funds currently available in an account. If a customer doesn’t opt-in to the overdraft program their transaction is simply declined.

While that requirement has been in the books since 2010, a Pew Charitable Trusts report and video released earlier this year found that many account holders were unaware of the opt-in rule and several were never given the option.

The letter, known as a Notice and Opportunity to Respond and Advise (NORA), gives the bank the opportunity to present its position on the program and why it should not face sanctions to the CFPB.

A spokesperson for TCF tells the Chicago Tribune that the bank plans to respond to the letter.

“We believe our overdraft ‘opt-in’ practices comply with all applicable laws and regulations,” the spokesperson said.

TCF Bank overdraft practices could trigger legal action [The Chicago Tribune]

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