Compliance Blog

By Eliott C. Ponte, Law Clerk

Free Checking Means Free, No Catches… None!

Earlier this month, the Consumer Financial Protection Bureau (CFPB) published a consent order in which M&T Bank consented to pay a $200,000 civil money penalty and return $2.9 million in assessed fees to 59,000 of its customers for alleged UDAAP and Truth in Savings violations.  According to the consent order, M&T Bank advertised free checking accounts to consumers when, in fact, the free checking account was only free if the participating consumer maintained a certain level of account activities.

After reading both the CFPB Press Release and the consent order, it appears that M&T Bank decided it wanted to offer a free checking account product with a catch:  the consumer must maintain a minimum level of account activity for 90 consecutive days.  If a consumer failed to maintain the minimum activity level after 90 days, the consumer was automatically withdrawn from the free checking account and enrolled into a new non-free checking account.  However, the advertisements made by M&T Bank failed to mention the required minimum level of account activity.  Below are some of the advertisements made by M&T Bank as mentioned in the consent order:

• “Have you raised the green flag for free checking from M&T Bank?  There’s no minimum balance requirement and no monthly service charge;”
• “Untangle yourself from monthly service fees.  Get a free checking account at M&T.  No strings attached;”
• “Free yourself from monthly service fees.  Get free checking from M&T Bank;”
• “M&T Totally Free Checking No minimum Balance.  No monthly service charge.”

While the advertisements failed to mention that a consumer had to maintain a minimum level of account activity to remain enrolled in the free checking account, M&T Bank disclosed this requirement to the consumer prior to opening the account.  As stated in the consent order, consumers received written notice of both the requirements to maintain the free checking account and the consequences for failing to meet the minimum requirements when they opened their accounts.  In fact, the complaint acknowledges that M&T Bank gave each consumer a one-page document that disclosed these requirements.  Moreover, the consumers also received an additional one-page document that contained the features of the non-free checking account, which included the disclosure of the monthly maintenance fee for not meeting the required activity requirements of the non-free checking account, in case the consumer failed to meet the minimum activity requirements of the free checking account. 

Nevertheless, from the CFPB’s perspective, these prophylactic measures taken by M&T Bank still violated UDAAP because none of the advertisements mentioned either the minimum activity requirement or the automatic conversion from a free checking account to a non-free checking account.  Moreover, the CFPB claimed this violated Truth in Savings because the regulation prohibits advertising an account as “free or no cost” if a maintenance or activity fee can be imposed on the account. 

While consent orders are not actual interpretations of law or regulation (consent orders are merely settlement agreements between two parties, and, unlike the opinion of a court, cannot be relied on in other enforcement actions), it is important that compliance officers pay attention them because consent orders tells the industry what a regulator thinks is a violation of a law or regulation.  In the case of M&T Bank, the consent order tells us what the CFPB thinks is a violation of UDAAP and Truth in Savings for the purposes of advertising free checking.  If a credit union is thinking of advertising a free checking account product, the credit union should remember this consent order and avoid the mistakes the CFPB claims M&T Bank made.

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Nuptial Pictures!

Thank you to everyone who sent me emails congratulating me on my nuptial.  The positive remarks were a wonderful thing to read on my first day back at NAFCU.  As promised, I have posted some wedding pictures below.  In the coming blog posts, I will post highlights of my honeymoon trip through Europe and North Africa.  

Here comes the bride (and her father). 

Husband and wife during our first toast.

Below is a collage of pictures from our wedding photographer.

And last but not least, a wedding selfie!