The CFPB, FDIC and Office of the Comptroller of the Currency have ordered Citizens Bank, N.A., Citizens Financial Group, Inc. and Citizens Bank of Pennsylvania to pay tens of millions of dollars in restitution and penalties for pocketing money from customers whose deposit slip totals didn't match the amounts deposited by the institution. The move marks the first action the CFPB has ever taken in regard to deposit processing practices.
Between Jan. 1, 2008, and Nov. 30, 2013, when the bank's scanners misread either deposit slips or deposited checks, or if the totals on deposit slips did not equal the actual deposit totals, Citizens Bank did not take action to fix the mistake if it fell below a certain dollar amount, the CFPB said in a statement. In some cases, when the total on the deposit slip was lower than the actual deposit amount, the bank credited the customer for the lower amount and kept the difference.
"In other words, if the bank read the customer's deposit slip as totaling $100, but the customer had actually deposited $150, the bank took the $50 difference for itself without ever informing the customer about what it had done," CFPB Director Richard Cordray said in a statement. The bank shorted customers millions of dollars over the years this way, he added.
Citizens Bank told customers its deposits were subject to verification, but only looked into discrepancies greater than $50 between January 2008 and September 2012; between September 2012 and November 2013, it only looked into discrepancies above $25, according to the CFPB's announcement.
"Like many other peer banks, Citizens employed certain practices to ensure the next-day crediting of deposits in situations when deposit slips contained mathematical errors," Citizens Bank told CU Times in a statement. "However, these past practices and disclosures, principally prior to early 2011, could have been better. Our implementation of a new teller system in the fourth quarter of 2013 has automated this reconciliation process, and we believe our process is now considered among the best in the industry."
Today's CFPB consent order requires the bank to refund approximately $11 million to customers and pay a $7.5 million penalty. The FDIC has also ordered Citizens Bank to pay restitution and a $3 million civil penalty. In addition, the OCC ordered the bank to pay restitution and a $10 million civil penalty. In total, Citizens Bank must refund about $11 million to customers and pay $20.5 million in federal penalties, the CFPB said.
Customers who were overcredited will keep the excess funds applied to their accounts, the bank said.
As part of the enforcement actions, the FDIC and OCC are ordering additional relief for business accounts, the CFPB said. That includes requiring Citizens Bank to submit a restitution plan to the FDIC within 90 days explaining how it will make whole all affected business accountholders between Jan. 1, 2008, and Oct. 31, 2013.
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