Refugio, TXThe Office of Thrift Supervision (OTS) has ordered a Texas-based bank to pay restitution for excessive bank fees. Woodforest Bank, a thrift institution located in Refugio, Texas, agreed on April 23 to pay a penalty of $400,000 and refund more than $12 million to consumers who were charged excessive overdraft fees on accounts.
"Overdraft protection programs can benefit consumers, but if done the wrong way, they can victimize the customers they are supposed to be helping," said John E. Bowman, OTS Acting Director. "We are taking these enforcement actions and issuing this guidance today to ensure OTS-regulated institutions conduct these programs in the right way."
The OTS ordered the thrift institution to immediately cease unfair and deceptive practices, reform its overdraft protection program and develop a plan to reimburse consumers affected by the actions of the bank.
According to a statement issued on April 23, the OTS directed the institution to "submit to the OTS a new three-year business plan, maintain strong capital and submit an acceptable plan for managing cash flow."
The press release continued: "In its proposed Supplemental Guidance on Overdraft Protection Programs, the OTS emphasized that thrift institutions must clearly represent the features of such programs, provide consumers with the opportunity to choose whether to participate, explain the thrift's policies on clearing transactions and place reasonable aggregate limits on overdraft fees."
The proposed guidance outlined above was intended to supplement guidance already provided to Woodforest in 2005.
In addition to taking action against Woodforest, the OTS proposed guidance to its own examiners and OTS-regulated institutions about overdraft practices, including those discovered at Woodforest. The proposed guidance addresses practices prohibited by the Federal Trade Commission Act for being unfair or deceptive, and others that violate other federal laws or regulations.
Woodforest is to deposit a sum exceeding $12 million into an account to be used for the reimbursement of current and former customers "who were misled about the cost of overdraft protection and charged excessive overdraft-protection fees," the statement said. "The OTS found that Woodforest relied on unreasonably high levels of such fees."
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