Toronto-Dominion Bank’s TD-T regulatory woes continue to pile up in the United States, with the lender paying US$28-million in penalties for sharing inaccurate information about its clients.
The penalty is TD’s second levied by the Consumer Financial Protection Bureau (CFPB). On Wednesday, the agency’s director called on regulators to “focus major attention” on the bank to ensure it makes reforms. The request comes as TD finalizes financial penalties and remediation efforts with three different watchdogs and the Department of Justice for major anti-money-laundering lapses.
“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,” CFPB director Rohit Chopra said in a statement. “Regulators will need to focus major attention on TD Bank to change its course,” he said.
The director’s words carry extra weight because TD said in August that it expects to reach a global resolution for its anti-money-laundering lapses, which will include monetary and non-monetary penalties, by the calendar year end. While TD has indicated how large a total for the financial penalties could be – US$3-billion – it remains unclear whether the bank will have future U.S. growth constrained until it gets its house in order.
The CFPB announced Wednesday that TD is paying US$28-million for giving inaccurate information about its clients to consumer reporting agencies over several years. Consumer reports are used by third parties such as financial institutions, landlords and employers when determining whether to offer someone a credit card, housing or even a job.
Through its investigation, the CFPB discovered that TD repeatedly shared inaccurate information to these groups, including statements about deposit accounts the bank “knew or suspected were fraudulently opened.” The inaccurate information also contained errors about personal bankruptcies and credit-card delinquencies.
TD will pay US$20-million as a civil penalty and another US$7.76-million in restitution to tens of thousands of victims.
“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,” Mr. Chopra said.
TD said Wednesday it co-operated with the CFPB investigation and is committed to delivering on its responsibilities to customers.
“Long before this settlement, TD self-identified these matters and voluntarily and proactively implemented enhancements to our furnishing and dispute handling practices,” the bank said in an e-mailed statement.
TD Bank is already in the hot seat with U.S. regulators because of serious lapses with its anti-money-laundering defences. The bank has set aside more than US$3-billion to settle investigations from multiple U.S. watchdogs.
In one instance, TD featured prominently in an investigation into a criminal ring that laundered US$653-million worth of drug money through financial institutions in New York, New Jersey and Pennsylvania – including several of TD’s branches.
While the size of the expected anti-money-laundering fine has not been finalized, the money that TD has put aside suggests it will be the largest penalty that a Canadian bank has paid in the United States. At US$3-billion, it is also believed to be the second-largest U.S. regulatory penalty levied against any bank over similar anti-money-laundering issues.
Wednesday’s fine, while much smaller, marks the bank’s second significant run-in with the U.S. consumer-protection bureau. In 2020, the CFPB fined TD US$122-million for illegal overdraft-fee practices.
The CFPB has targeted overdraft fees at multiple major lenders in the U.S., and earlier this year, the bureau said its crackdown had lowered overdraft fees across the country by 50 per cent from prepandemic levels.
In 2023, TD’s U.S. overdraft-fee revenue totalled US$210-million, down 63 per cent from US$565-million in 2019.