Consumers lured by M&T Bank’s free checking account marketing campaign were misled, the Consumer Financial Protection Bureau said Thursday. Customers who thought their accounts were fee-free were switched into fee-based accounts without their permission, costing $5-$14 monthly, the bureau said. The CFPB ordered the bank to refund $2.9 million to 59,000 account holders.
“Although M&T promised people free checking, tens of thousands of consumers ended up paying for a product they had thought was free,” said CFPB Director Richard Cordray. “This is an important reminder to all banks and credit unions that they cannot misstate to consumers whether a financial product or service is free. Today we are putting $2.9 million back in the pockets of consumers as a result.”
Consumers placed in the fee accounts could only avoid the fee by maintaining a minimum balance of $1,500 monthly. Of the 80,000 accounts swept into the fee accounts, 59,000 didn’t do so and were hit with the fees. Because of the fees, some consumers ended up with a ding on their credit report. M&T has been ordered to reverse the negative report.
Impacted consumers still banking with M&T will receive refunds in their accounts. Former customers will receive checks.
The CFPB said in its statement that M&T:
Deceptively advertised checking accounts with no strings attached: M&T’s free checking account advertisements included such ads as, “Untangle yourself from monthly service fees. Get a free checking account at M&T. No strings attached.” But M&T did not disclose in such ads that the free checking account customers had to maintain a minimum level of account activity with deposits and withdrawals to maintain the free account. These kinds of ads for free checking ran in various geographic regions through mediums including television, print, and radio. M&T also marketed the free checking accounts to its customers on their account statements and on ATM screens and receipts.
Automatically converted many free checking accounts into accounts with fees: If there was no account activity for 90 days, M&T automatically converted the “Free Checking” accounts to “M&T First” checking accounts. Consumers with “M&T First” accounts who failed to maintain an average or combined monthly balance of $1,500 were charged fees of $5 to $14 per month.
Did not adequately alert consumers to the account conversions: The only indication customers received that their “Free Checking” account had been converted to an “M&T First” account due to account inactivity was that “M&T First” would appear on account documents, such as paper statements.