TD Bank fined $122M by U.S. consumer regulator for pushy tactics selling overdraft service

TD Bank has agreed to pay back $97 million US to 1.4 million of its U.S. customers for deceptive marketing tactics to sell them an overdraft service the bank claimed was a free perk but in reality was not.

The bank, whose full corporate name in the U.S. isTD Bank, America's Most ConvenientBank, will also paya penalty of $25 million in addition to the restitution it will pay to customers.

TheConsumer Financial Protection Bureau (CFPB)announced on Friday that the bank's sales tactics violated several U.S. laws "by charging consumers overdraft fees for ATM and one-time debit card transactions without obtaining their affirmative consent."

The service, which TD callsDebit Card Advance (DCA), would allow a customer to withdraw money from their chequing account, even if the withdrawal would cause their balance to go below zero.

The consumer rights watchdog saidTD marketed the service as a free perk for new chequing accountsbut actually charged customers $35every time they used it. And the service was optional all along.

"When TD Bank enrolled some consumers in DCA over the phone, TD Bank deceptively described DCA as covering transactions unlikely to be covered by DCA," the bureau said.

The bureau also found that the bank sometimes wouldrequirenew customers to sign its overdraft notice with the "enrolled" option pre-checked without mentioning or explaining the service to them.

Bank has 9 million customers in U.S.

The settlement covers any customers of the bank's 1,250 branches who signed up for a chequing account between 2014 and 2018and signed up for the service, knowingly or not. The bank has ninemillion customers in the U.S.,and the bureau saidat least 1.4 million of them may have been impacted.

In a statement to CBC News, TD Bank says only U.S. customers would have been impacted and thus included in the settlementas the service "is not offered by TD Canada Trust" in Canada.

As part of the settlement, the bank agreed to change its enrolment practices and stop using pre-marked overdraft notices to obtain a consumer's consent.

In a statement, TD called the program a "safe, reliable source of short-term liquidity and helps them avoid the inconvenience that may result from declined transactions."

"We disagree with the CFPB's conclusions. We have co-operated fully to resolve this matter and are moving forward with a continued focus on meeting the needs of our customers," said Greg Braca, TD's president and chief executive of U.S. operations, adding that the bank did not admit to any wrongdoing.