Bank of America, the nation's second largest bank, has been ordered to pay more than $100 million to customers for double charging insufficient fund fees, withholding reward bonuses and opening accounts without customers' knowledge or permission. The bank is also on the hook for an additional $150 million in penalties for the same violations.

The Consumer Financial Protection Bureau announced Tuesday that an investigation found that Bank of America harmed hundreds of thousands of customers across multiple product lines over a period of several years through a series of illegal practices. As a result, Bank of America was ordered to pay over $100 million to customers and another $90 million in penalties. A separate $60 million fine has been ordered by the Office of the Comptroller of the Currency for violating laws around overdraft fees.

CFPB Director Rohit Chopra said in a news release that Bank of America's double-dipping on fees, opening accounts without customer consent and withholding rewards "are illegal and undermine customer trust," practices he said the CFPB will put an end to across the banking system.

Bank of America's "double-dipping scheme"

According to the CFPB, Bank of America utilized a "double-dipping scheme" to "harvest junk fees" from customers. It did so by charging people $35 whenever they didn't have enough funds available, but repeatedly charged customers for the same transaction, which the CFPB said generated "substantial additional revenue".

Chopra told NPR Business Correspondent David Gura, "Building a business model by double dipping on fees is simply not legal, and that's why we've sanctioned Bank of America and ordered them to pay back the customers they cheated."

The OCC said it found that the bank charged "tens of millions of dollars" in fees in resubmitted transactions, in violation of Section 5 of the Federal Trade Commission Act, which prevents financial institutions from using unfair or deceptive acts and practices.

"Overdraft programs should help, not harm, consumers," Acting Comptroller of the Currency Michael J. Hsu said in a news release. "Today's action demonstrates the OCC's commitment to protecting consumers and promoting fairness and trust in banking. We expect banks to conduct their activities in compliance with all applicable laws and standards, and when they don't, we will act accordingly."

Bank of America Senior Vice President of Media Relations Naomi R. Patton told NPR that the bank voluntarily reduced overdraft fees and eliminated "all non-sufficient fund fees" in the first half of 2022. She said the changes have resulted in a drop in revenue from these fees of over 90%. The bank also dropped the overdraft fee from $35 to $10 in May 2022.

Withholding credit card cash and point rewards

The CFPB said Bank of America targeted potential-customers by offering special cash and point rewards if they signed up for a credit card, a common signing bonus used by competing credit card companies. However, according to the CFPB, Bank of America illegally withheld those bonuses from tens of thousands of customers.

Chopra said Bank of America has been ordered to follow through on those promises.

"We know in the U.S. many people are really closely scrutinizing which credit card they sign up for based on rewards, whether it's cash, bonuses at enrollment, or airline points, or other proprietary point systems," Chopra said. "The fact that Bank of America advertised these signup bonuses and then did a bait and switch completely undermines the the fair market and consumer choice."

Bank of America employees opened accounts without consumers' knowledge

As far back as at least 2012, Bank of America employees illegally applied for and enrolled consumers for credit cards without their knowledge or permission to reach sales-based incentive goals and evaluation criteria, according to the CFPB. Employees illegally signed up customers by using or obtaining consumers' credit reports and completed applications without their permission, which resulted in unjust fees and negative impacts to customers' credit scores.

"That's essentially taking over someone's identity and exploiting it financially, and it's totally improper," Chopra told NPR. "It's totally inexcusable. So, whether it is happening to just a handful to thousands or to millions, we find this extremely serious."

Bank of America is a repeat offender

This isn't the first time the bank has been penalized for conducting illegal practices. Bank of America shelled out $727 million to the CFPB in 2014 for illegally deceiving roughly 1.4 million customers through deceptive marketing products. The bank was also ordered to pay a $20 million civil money penalty for charging 1.9 million consumers for a credit monitoring and credit reporting services they never received, according to the CFPB.

The bank was also slapped with two other penalties in 2022 totaling $235 million: a $10 million civil penalty for unlawfully processing out-of-state garnishments--removing customer funds for debts--against customer bank accounts; a $225 million fine for automatically and unlawfully freezing customer accounts with a fraud detection program during the COVID-19 pandemic.

"Bank of America is a repeat offender. Being a household name that has been punished before didn't stop it from allegedly cheating customers out of tens of millions of dollars in fees and credit card rewards and opening up accounts without their authorization," U.S. Public Interest Research Groups Consumer Campaign Director Mike Litt said in a statement Tuesday. "The Consumer Financial Protection Bureau's strong enforcement action shows why it makes a difference to have a federal agency monitoring the financial marketplace day in and day out."