What’s the takeaway on the recent action by the Consumer Financial Protection Bureau’s actions against M&T Bank based out of Buffalo (NYSE: MTB)?
The action can be found here: http://www.consumerfinance.gov/newsroom/cfpb-takes-action-against-mt-bank-for-deceptively-advertising-free-checking/
And M&T’s signed Consent can be found here: http://files.consumerfinance.gov/f/201410_cfpb_consent-order_m-t.pdf
Basically, the CFPB found that M&T Bank had run deceptive ads luring customers into what they thought would be free accounts. Where M&T went wrong was that M&T did not, according to the CFPB, tell their customers that to keep those accounts they had to meet certain thresholds (number of deposits, withdrawals, et al). And, if they did not meet those, then they would automatically be transferred to a fee based account. And, this would occur without the customer’s consent, nor knowledge, according to the CPFB.
This resulted in millions of dollars in fee based income to M&T Bank from their clients who did not know that they would be subject to a fee based account when signing up for the free account, per the CFPB.
If one was to take a stab at what really happened it probably was an oversight by an employee who approve the ads for the free accounts. Maybe he or she did not know or forgot to check that the ad had a disclaimer stating that the customer had to hae a certain amount of transactions.
And, maybe, the computer at M&T bank just was set up to automatically sweep a person’s free account to a fee based one when certain thresholds were not met and it was not tied to send out an emailed or snail mail disclosure to the customer.
Let’s say that’s all true.
But, M&T Bank’s response was basically that the laws are changing and they are adjusting their practices to comply with the laws. It is true that regulatory laws are changing. It is also true that bankers are working hard to keep up with the regulatory changes. If you dig deep enough in their response you’d almost read that they state that the CFPB did not even exist when this practice was occurring. True.
But, misleading ads were never legal. Not in 2014. Not in 2000. Not in 1995. Not in 1990. Not even in the 1960’s.
Banks and Bankers and everyone in the financial world had staff approving advertisements about financial products long before the CFPB because there were other regulators who monitored and demanded ads be truthful and transparent about the financial products offered.
M&T Bank failed in this. If it was simply the ad, it could be chalked up to clerical. But, having the accounts sweep to fee based leads one to think it may have been more than a failed review of an advertisement.
And, stating that laws are changing and M&T and this particular instance of migrating accounts to fee based stopped two-years ago is misleading and politically muddying the waters.
Which makes one question M&T’s ethics on top of the actions cited by the CFPB
Phil LaTessa, Syracuse Blog 