The Consumer Financial Protection Bureau announced a consent decree late last week against M&T Bank. Apparently M&T advertised "no strings attached" free checking without explaining in its advertisements that if an account was inactive for 90 days it would switch to an account that could incur fees if a minimum balance was not maintained. Further, when the account began incurring fees the Bank did not do enough to apprise customers if the change.
This provides another example that lenders should look to both for advertising and UDAP compliance. Here, fees would only be incurred under a combination of fairly uncommon circumstances. However, by saying "no strings attached" the bank created what would lead many to expect a no fee account under all circumstances. Moreover, when the account began to incur fees not enough was done to apprise customers as the CFPB found that there was an affirmative duty to inform customers.
To avoid claims of unfair or deceptive acts or practices it is incumbent upon lenders to adopt practices that are unlikely to mislead, regardless of whether the misunderstanding is intentional. In other words, adopt practices that ensure borrowers understand as opposed to practices that enable them to understand. This is clearly what the CFPB now expects.
