Federal Regulators and the CFPB Fine Bank and Order Remediation as to Deposit Discrepancies

In a joint enforcement action, the CFPB, OCC and FDIC have entered into consent orders with Citizens Bank N.A., Citizens Bank of Pennsylvania and their parent company, Citizens Financial Group, Inc.  (the “Banks”). The consent orders allege the Banks engaged in unfair and deceptive practices between 2008 and 2013 with respect to their handling of deposit discrepancies.  In total, the Banks are being ordered to refund any deposit discrepancies which were not properly credited to customer accounts (estimated to be in excess of $16 million dollars) and pay over $20 million in penalties.  Additionally, the Banks are being ordered to remediate their practices and put compliance management programs and audit procedures in place to prevent further issues.

The consent orders allege that between January of 2008 and November of 2013, the banks violated §5 of the FTC Act and §1036 of Dodd Frank by engaging in unfair and deceptive practices regarding their deposit discrepancy policies.  The consent orders allege that the Banks’ violations were two fold.  The Consent Orders allege that the Banks told customers that deposits were subject to verification, suggesting that the banks would take steps to ensure deposits were accurately credited when a discrepancy arose between the deposit slip and the actual amount of the deposit.  Second, the Banks made no adjustments to the deposit amounts where deposit discrepancies were under a certain threshold ($50 from January 2008-September 2012 and $25 from September 2012 through November 2013). In other words, the deposits were credited for the amount on the deposit slip irregardless of the discrepancy.  The net effect was that if a customer miscalculated its deposit and the discrepancy was under the thresh hold, the deposit was never credited to reflect the discrepancy. 

The Orders require the Banks to:

• Provide proper vendor management to ensure their service providers and affiliates properly and accurately resolve deposit discrepancies;
• Establish a Compliance Committee to monitor and coordinate the Banks’ adherence with the consent orders;
• Develop a written Consumer Compliance Internal Audit Program for the processing of deposits and deposit discrepancies which includes written policies and procedures for conducting audits to insure deposits and deposit discrepancies are accurately handled, including the frequency, scope and depth of said audits;
• Submit a Compliance Plan which:
  • Puts in place compliance measures, as well as policies, procedures and practices, to ensure accurate processing of deposits and deposit discrepancies;
  • Incorporates sufficient monitoring and oversight of the processing of deposits and deposit discrepancies;
  • Incorporates training of personnel to insure accurate resolution of deposit discrepancies; and
  • Enhance or incorporate complaint procedures and processing to ensure despot discrepancy complaints are identified, tracked and resolved in accordance with the Banks’ policies and procedures.

The Orders additionally require the Banks to reimburse affected account holders for the amount of any funds not properly credited to their account as a result of the discrepancy, plus any bank charges resulting from the under-crediting (for instance, overdraft) and interest.  Additionally, the Orders require the following civil penalties: $7.5 million to the CFPB, $3 million to the FDIC and $10 million to the OCC.