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Toronto Dominion Bank to Pay $28M Penalty for Credit Reporting Issues
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The Toronto-Dominion Bank (TD - Free Report) has agreed to pay a $28 million penalty in response to the Consumer Financial Protection Bureau (CFPB) order concerning credit reporting issues. The bank has been accused of mishandling customers’ credit information and failing to make necessary amendments to its practices.
Allegations Against TD
TD signed a consent agreement with the CFPB on Wednesday admitting that it provided false information to consumer reporting companies, at times intentionally, and acknowledging its shortcomings in rectifying the failures that took place.
Rohit Chopra, director of the CFPB, stated, “The CFPB's investigation found that TD Bank illegally threatened the consumer reports of its customers with fraudulent information and then barely lifted a finger to fix it. Rather than treating its customers fairly and following the law, TD Bank's management clearly cared more about growth and expanding its empire through mergers.”
The alleged violations comprise the sharing of imprecise data regarding credit card delinquencies and the submission of bad information about certain accounts that it suspected to be fraudulent. The CFPB claims certain accounts remained open despite the voluntary closure of the said accounts by the clients.
Toronto Dominion Bank’s Response to the Allegations
The bank has neither admitted nor denied the allegations raised by the CFPB as per the consent order. Toronto Dominion Bank’s spokesperson Miranda Garrison stated in an email that the bank “cooperated fully to resolve this matter.”
“Long before this settlement, TD self-identified these matters and voluntarily and proactively implemented enhancements to our furnishing and dispute handling practices,” Garrison added.
Redressal Mechanism & Fines To be Paid by TD
Toronto Dominion Bank must pay $20 million into the CFPB’s fund for victims of consumer financial protection law violations. An additional $7.76 million will be used to compensate affected customers, each of whom will receive $150. Any of the unclaimed funds will be transferred to the CFPB.
Further, TD is required to develop a compliance plan to address the CFPB’s allegations, improving its recordkeeping protocols for credit reporting and preparing a progress report for the bureau.
Toronto Dominion Bank’s Other Regulatory Issues
This action comes amid the massive sanctions and charges faced by the bank from other U.S. regulators concerning violation of anti-money laundering (AML) practices.
Last month, the bank announced an additional provision of $2.6 billion in its fiscal third-quarter results to meet the estimated cost of $3 billion for compliance failures regarding AML practices.
Last year, after Toronto-Dominion Bank’s landmark $13.4 billion deal to acquire First Horizon collapsed, the Canadian lender started receiving inquiries from the U.S. Department of Justice, financial regulators and the Treasury Department regarding its AML practices.
The core allegations have been that TD failed to catch money laundering and other financial crimes at several branches in the United States, where customer-facing employees took bribes to help move money.
In 2020, the bank faced a $122 million fine by the CFPB post an investigation revealing that it deceptively marketed a debit card advance service as free while levying fees on overdraft transactions.
TD’s Zacks Rank & Price Performance
Year to date, shares of Toronto Dominion Bank have lost 4.5% against the industry’s growth of 7.2%.
Earlier this month, in a settlement with the California Department of Justice over crypto withdrawals, Robinhood Markets, Inc.’s (HOOD - Free Report) cryptocurrency platform is set to pay $3.9 million. Per the claims, HOOD prevented its customers from withdrawing cryptocurrency from their accounts between 2018 and 2022.
Per California’s Attorney General Rob Bonta, Robinhood violated California law as it failed to deliver cryptocurrencies that its customers bought and because of this, customers were unable to withdraw their assets, forcing them to sell the same to exit the platform.
Bonta also said that Robinhood misled its customers about where their crypto assets were held. Also, the trading platform falsely advertised that it would connect customers to multiple trading venues so that they would get competitive prices.
Similarly, last month, an order was issued by the Commodity Futures Trading Commission (“CFTC”) for The Bank of New York Mellon Corporation (BK - Free Report) to pay a civil penalty of $5 million for failing to report millions of swap transactions to a registered swap data repository in violation of a prior CFTC order.
BNY Mellon also failed to supervise its swap dealer business as required by the Commodity Exchange Act and CFTC regulations.
In addition to the monetary penalty, BNY Mellon has agreed to retain an independent compliance consultant to review and provide advice regarding its compliance program.
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Toronto Dominion Bank to Pay $28M Penalty for Credit Reporting Issues
The Toronto-Dominion Bank (TD - Free Report) has agreed to pay a $28 million penalty in response to the Consumer Financial Protection Bureau (CFPB) order concerning credit reporting issues. The bank has been accused of mishandling customers’ credit information and failing to make necessary amendments to its practices.
Allegations Against TD
TD signed a consent agreement with the CFPB on Wednesday admitting that it provided false information to consumer reporting companies, at times intentionally, and acknowledging its shortcomings in rectifying the failures that took place.
Rohit Chopra, director of the CFPB, stated, “The CFPB's investigation found that TD Bank illegally threatened the consumer reports of its customers with fraudulent information and then barely lifted a finger to fix it. Rather than treating its customers fairly and following the law, TD Bank's management clearly cared more about growth and expanding its empire through mergers.”
The alleged violations comprise the sharing of imprecise data regarding credit card delinquencies and the submission of bad information about certain accounts that it suspected to be fraudulent. The CFPB claims certain accounts remained open despite the voluntary closure of the said accounts by the clients.
Toronto Dominion Bank’s Response to the Allegations
The bank has neither admitted nor denied the allegations raised by the CFPB as per the consent order. Toronto Dominion Bank’s spokesperson Miranda Garrison stated in an email that the bank “cooperated fully to resolve this matter.”
“Long before this settlement, TD self-identified these matters and voluntarily and proactively implemented enhancements to our furnishing and dispute handling practices,” Garrison added.
Redressal Mechanism & Fines To be Paid by TD
Toronto Dominion Bank must pay $20 million into the CFPB’s fund for victims of consumer financial protection law violations. An additional $7.76 million will be used to compensate affected customers, each of whom will receive $150. Any of the unclaimed funds will be transferred to the CFPB.
Further, TD is required to develop a compliance plan to address the CFPB’s allegations, improving its recordkeeping protocols for credit reporting and preparing a progress report for the bureau.
Toronto Dominion Bank’s Other Regulatory Issues
This action comes amid the massive sanctions and charges faced by the bank from other U.S. regulators concerning violation of anti-money laundering (AML) practices.
Last month, the bank announced an additional provision of $2.6 billion in its fiscal third-quarter results to meet the estimated cost of $3 billion for compliance failures regarding AML practices.
Last year, after Toronto-Dominion Bank’s landmark $13.4 billion deal to acquire First Horizon collapsed, the Canadian lender started receiving inquiries from the U.S. Department of Justice, financial regulators and the Treasury Department regarding its AML practices.
The core allegations have been that TD failed to catch money laundering and other financial crimes at several branches in the United States, where customer-facing employees took bribes to help move money.
In 2020, the bank faced a $122 million fine by the CFPB post an investigation revealing that it deceptively marketed a debit card advance service as free while levying fees on overdraft transactions.
TD’s Zacks Rank & Price Performance
Year to date, shares of Toronto Dominion Bank have lost 4.5% against the industry’s growth of 7.2%.
Image Source: Zacks Investment Research
Currently, TD carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Similar Issues Faced by Other Finance Firms
Earlier this month, in a settlement with the California Department of Justice over crypto withdrawals, Robinhood Markets, Inc.’s (HOOD - Free Report) cryptocurrency platform is set to pay $3.9 million. Per the claims, HOOD prevented its customers from withdrawing cryptocurrency from their accounts between 2018 and 2022.
Per California’s Attorney General Rob Bonta, Robinhood violated California law as it failed to deliver cryptocurrencies that its customers bought and because of this, customers were unable to withdraw their assets, forcing them to sell the same to exit the platform.
Bonta also said that Robinhood misled its customers about where their crypto assets were held. Also, the trading platform falsely advertised that it would connect customers to multiple trading venues so that they would get competitive prices.
Similarly, last month, an order was issued by the Commodity Futures Trading Commission (“CFTC”) for The Bank of New York Mellon Corporation (BK - Free Report) to pay a civil penalty of $5 million for failing to report millions of swap transactions to a registered swap data repository in violation of a prior CFTC order.
BNY Mellon also failed to supervise its swap dealer business as required by the Commodity Exchange Act and CFTC regulations.
In addition to the monetary penalty, BNY Mellon has agreed to retain an independent compliance consultant to review and provide advice regarding its compliance program.