TCF Bank could face legal action for overdraft protection

Federal regulators are considering legal action against TCF Bank, alleging "unfair, deceptive and abusive" practices related to its overdraft program.

The bank automatically provides overdraft coverage for checks and electronic payments for things like utility bills unless customers request to be excluded. But it does not provide overdraft protection for ATM and debit card transactions unless customers authorize that.

The Consumer Financial Protection Bureau says it's concerned about TCF's opt-in requirements for providing overdraft protection.

In a regulatory filing, TCF said it had received a letter from the watchdog agency, asking the bank to justify its overdraft policy. A TCF spokesperson said the bank believes its practices are legal.

TCF charges overdraft fees as high as $37 per item, with a limit of five overdrafts per day.

Since 2010, federal rules have prohibited banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers opt in to overdraft protection. If consumers don't opt-in, banks can decline transactions but won't charge fees, the CFPB says.

Earlier this year, an Alabama bank that automatically enrolled customers in an overdraft program was fined $7.5 million by the CFPB and compelled to refund tens of millions of dollars.

TCF collected $107 million in fees and service charges for the first nine months of this year.

Editor's note (Nov. 6, 2015): An earlier version of this story may have been unclear describing TCF's overdraft enrollment policy. To clarify, TCF provides customers overdraft coverage automatically for certain types of transactions, but not others.