Utah bank fined $44M for unfair practices harming customers over five years
A Utah-based bank and its parent company now face a $44 million fine after a Federal Reserve investigation uncovered repeated violations. Over five years, the institution engaged in unfair and deceptive practices that harmed customers. The penalties follow a string of similar enforcement actions against major banks in 2023.
The Federal Reserve Board issued a consent order detailing multiple breaches between 2017 and December 2022. Customers were blocked from accessing unemployment benefits without any way to unblock their accounts. The bank also failed to release extended authorisation holds on prepaid debit card transactions on time, leaving users without funds.
Misleading practices extended to account management and fees. The bank charged customers on closed accounts while failing to clarify the accounts' actual status. It also falsely advertised that prepaid debit cards could be registered by phone, when only online registration was possible. Additionally, tax preparation fees were not properly disclosed to clients.
The enforcement action requires the bank to overhaul its compliance systems. New measures include stronger board oversight and revised Bank Secrecy Act (BSA) and anti-money laundering (AML) programmes. This penalty aligns with the Federal Reserve's broader crackdown on compliance failures, following fines against Wells Fargo ($1.95 billion), US Bank ($37.5 million), and Truist Bank ($21 million) in 2023 for similar issues.
The $44 million fine marks the latest in a series of regulatory actions targeting unfair banking practices. Both traditional banks and fintech firms are now under pressure to review and update their compliance procedures. The Federal Reserve's order aims to prevent further violations and ensure clearer, fairer treatment of customers.
