TD Bank Faces Hefty Fines for Inaccurate Credit Reporting Practices

In a significant enforcement action, the Consumer Financial Protection Bureau (CFPB) has ordered TD Bank to pay a substantial sum of $7.76 million in redress to tens of thousands of victims affected by the bank's unlawful practices. The CFPB investigation found that for years, TD Bank repeatedly shared inaccurate and negative information about its customers with consumer reporting companies, including systemic errors related to credit card delinquencies and bankruptcies. In addition to the redress, the CFPB has imposed a $20 million civil money penalty on the bank.

Uncovering TD Bank's Troubling Credit Reporting Practices

Systemic Errors in Credit Card Reporting

The CFPB's investigation revealed that TD Bank had been reporting inaccurate information about its customers' credit card accounts to consumer reporting companies. Despite being aware of these errors, the bank failed to promptly correct the mistakes. In some cases, the bank shared inaccurate information about credit card delinquencies, while in others, it reported accounts as active even though customers had voluntarily closed them.

Sharing Fraudulent Account Information

By January 2022, TD Bank had identified hundreds of thousands of deposit account openings that were either confirmed or suspected to be fraudulent. However, instead of ensuring that only accurate information was shared with consumer reporting companies, the bank continued to report this fraudulent information as if it belonged to its legitimate customers. This included sharing derogatory information, such as accounts being overdrawn, with the consumer reporting agencies.

Failure to Investigate and Resolve Consumer Disputes

The CFPB's investigation also found that TD Bank did not have adequate processes in place to investigate consumer reporting disputes. The bank diverted resources from dispute investigations to other parts of its business, resulting in a failure to conduct reasonable and timely investigations. In some cases, the bank did not conduct any investigation at all and failed to properly notify consumers when it deemed a dispute as frivolous or irrelevant.

Regulatory Action and Penalties

The CFPB's enforcement action against TD Bank is based on the bank's violations of the Fair Credit Reporting Act and the Consumer Financial Protection Act. The order requires TD Bank to pay $7.76 million in redress to the affected consumers and a $20 million civil money penalty to the CFPB's victims relief fund.This is not the first time the CFPB has taken action against TD Bank. In 2020, the bureau ordered the bank to provide an estimated $97 million in restitution to approximately 1.42 million consumers and pay a $25 million penalty for illegal overdraft practices.

Implications and Lessons Learned

The CFPB's enforcement action against TD Bank serves as a stark reminder of the importance of accurate and responsible credit reporting practices. Financial institutions must prioritize the integrity of consumer data and ensure that any information shared with credit reporting agencies is truthful and up-to-date.The significant penalties imposed on TD Bank underscore the CFPB's commitment to protecting consumers from unfair, deceptive, and abusive practices in the financial sector. This case also highlights the need for financial institutions to have robust dispute resolution processes in place to address consumer concerns promptly and effectively.As the financial industry continues to evolve, it is crucial for banks and other financial service providers to maintain the highest standards of transparency, accountability, and customer service. The CFPB's actions against TD Bank serve as a warning to the industry, emphasizing the regulator's determination to hold institutions accountable for any violations of consumer protection laws.