Regions Financial is being investigated by a U.S. consumer protection watchdog, which is looking into policies that allowed the lender to take in hundreds of millions of dollars in overdraft and non-sufficient funds fees last year.
According to a disclosure by Regions on Thursday, the company is handing over information on its overdraft policies to the U.S. Consumer Financial Protection Bureau. The Birmingham, Alabama-based bank said it had set aside around $20 million as of Sept. 30 to cover all potential litigation expenses, including any that could arise from an enforcement action from the CFPB.
“Regions is in the process of responding to a civil investigative demand from the CFPB relating to certain of [its] overdraft practices and policies,” the company said in the filing. While management isn’t expecting the current probe to result in a material impact on its business, Regions said, a subsequent action from the watchdog could have “adverse” consequences.
The bank is cooperating with the information request, according to Jeremy King, senior vice president of public relations at Regions Bank.
“We take any inquiry very seriously, and we believe we have structured our overdraft services in a way that meets the needs of customers while complying with rules governing these services,” King added.
According to Regions Bank, customers who don’t have sufficient funds to cover automatic bill payments or transactions made with their checking account numbers will receive a $36 fee for each overdraft the lender chooses to pay on their behalf. Clients can also opt in to have overdrafts paid on credit card and ATM transactions.
The bank, which reported $145 billion in total assets as of Sept. 30, made $373 million from clients who overdrew their accounts or were charged for insufficient funds, according to an analysis by the Center for Responsible Lending. The sum was the seventh largest among U.S. lenders surveyed by the group.
That total also accounted for 17.7% of Regions Bank’s net investment income for 2019, compared to an average 5.9% among the top 20 U.S. lenders by overdraft and non-sufficient funds income.
It isn’t the first time Regions has faced questions about its overdraft policies. In 2015, the CFPB fined the bank $7.5 million for charging overdraft fees to clients who hadn’t opted in for overdraft protection, and for charging overdraft and non-sufficient funds fees on a deposit advance product despite claiming that it would not.
Regions executives said Thursday in earnings discloses that the lender is on track to close more than 110 branch locations in 2020 and 2021 amid ongoing revenue pressures. Regions posted adjusted earnings of $501 million for the third quarter, up 30% year over year.
The CFPB has also recently scrutinized overdraft practices at TD Bank. In August, the lender’s U.S. arm agreed to pay $97 million in restitution and a $25 million penalty to the regulator for improperly marketing and charging customers through its optional overdraft service.