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A sign directs customers to the M&T Bank branch at Erie Boulevard East and South Townsend Street in Syracuse. M&T has agreed to refund $2.9 million to customers and pay a $200,000 penalty to settle charges that it advertised "free" checking accounts that weren't so free.
(Rick Moriarty | rmoriarty@syracuse.com)
Buffalo, N.Y. — M&T Bank has agreed to refund $2.9 million to customers and pay a $200,000 penalty to settle charges that it advertised "free" checking accounts that weren't so free.
The U.S. Consumer Financial Protection Bureau said Buffalo-based M&T lured in consumers with promises of "no strings attached" free checking, without disclosing a requirement that customers maintain a minimum level of account activity with deposits and withdrawals.
When consumers had no account activity for 90 days, M&T automatically converted their "Free Checking" accounts to "M&T First" checking accounts, the bureau said. When consumers with "M&T First" accounts failed to maintain an average or combined monthly balance of $1,500, they were charged fees of $5 to $14 a month, according to the bureau.
The only indication customers got that their "Free Checking" account had been converted to an "M&T First" account that was subject to fees was that "M&T First" would appear on their account documents, the bureau said.
Of the approximately 80,000 "Free Checking" accounts the bank converted to "M&T First" accounts, about 59,000 were charged account fees because they did not meet the $1,500 account balance threshold, according to the bureau. M&T collected approximately $2.9 million in monthly maintenance fees from the 59,000 consumers, the bureau said.
M&T will provide $2.9 million in refunds to the approximately 59,000 consumers deceived into paying the fees and it will pay a $200,000 penalty for the violations, the bureau said. The settlement covers the period from Jan. 1, 2009, to Sept. 25, 2012, when M&T stopped the conversions.
While agreeing to the refunds and penalty, M&T did not admit to the bureau's allegations.
In a statement, Darren King, executive vice president for retail and business banking at M&T, said the bureau more than two years ago changed the way certain rules and regulations were to be interpreted and, under the new rules, "indicated a concern about the way one of our checking products was marketed."
"We immediately changed our policies and procedures in response, and we have cooperated fully with their inquiry," he said. "The regulatory environment has evolved, and our policies and procedures have evolved as well, not just to meet the regulators' new expectations, but also to meet the highest expectations of our customers."
Under its consent order with the bureau, M&T must refund to affected consumers the sum of all monthly maintenance fees they paid under the "M&T First" accounts. If the consumers have a current checking, savings or money market account with the bank, they will receive a credit to their account. For closed or inactive accounts, M&T will send a check to the affected consumers or reduce charged-off balances by the amount they were charged in fees.
M&T is one of the top 20 largest U.S. commercial bank holding companies, with approximately $90 billion in assets. It operates branches and ATMs in New York (including Syracuse), Pennsylvania, Maryland, Virginia, West Virginia, Delaware and the District of Columbia.
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