Santander Bank N.A. to Pay $10 Million for Deceptive Tactics

Santander Bank, N.A. (Santander) has been ordered by the Consumer Financial Protection Bureau (CFPB) to pay $10 Million in penalties for illegal overdraft practices. The CFPB charges that Santander’s vendor deceptively marketed their overdraft service and signed some bank customers up for the service without their consent.

Overdrafts can occur when consumers spend or withdraw more money from their checking accounts than is available. In 2010, federal rules changed to prohibit banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers affirmatively opt in. If the consumer chooses not to opt in, the bank can decline the transaction and can’t charge an overdraft fee.

From 2010 to 2014, Santander marketed and enrolled customers in their “Account Protector” overdraft service for ATM and one-time debit card transactions, at a charge of $35 per overdraft and sometimes more. Santander used a telemarketing vendor to call customers and get them to opt in to the service. The CFPB found that Santander used deceptive tactics to market the services and enroll customers in the service. Some of the tactics included enrolling customers without their consent, deceiving customers to believe the overdraft service was free, misleading customers to believe they would face fees whether they opted in or not to the service, misrepresenting the type of transactions covered under the service, and falsely claiming their call was not a sales pitch. Additionally, Santander offered the telemarketer financial incentives such as higher hourly pay if they met specific sales quotas.

Despite being aware of serious problems with improper tactics that the telemarketer used to achieve sales goals, and receiving complaints from consumers who had not consented to opting in to overdraft services, Santander continued to use the vendor until 2014. The CFPB claims Santander neglected to properly monitor the vendor and detect widespread problems with their opt in call campaigns.

In response to the action taken by the CFPB, Santander states they regret that the vendor they hired may not have followed their instructions in promoting their overdraft service and that they did not supervise them as closely as they should have. As a result, they terminated their relationship with the vendor and are continuing to implement additional controls to ensure more effective oversight for their vendors and processes.

Some of the measures Santander agreed to in the consent order with the CFPB includes validating all opt-ins associated with the telemarketer, not using a vendor to telemarket their overdraft service, and increase their oversight of all third-party telemarketers.

Overdraft fees can be costly. Here are a few tips to help you reduce or avoid overdraft fees:

• Don’t “opt in” to the service. If you don’t consent to the service, your bank can’t charge you a fee for an overdraft.
• Link your checking account to a savings or money market account at your bank or credit union. If you don’t have enough funds in your checking account to cover a transaction, the bank will pull money from the account you’ve elected to link to. Be aware there may be a fee to swap funds from a linked account, but it is typically lower than per item overdraft or non-sufficient fund fees. Check with your banking institution before setting this up so you are aware of the costs.
• Keep track of your balance. Many banks have features that can alert you of low balances and other useful tools to help you. Contact a bank representative for more information.
• Choose a checking or prepaid account that does not authorize overdrafts.

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