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The U.S. arm of Toronto-Dominion Bank will pay US$122-million in a settlement with the Consumer Financial Protection Bureau, which alleges the bank charged customers fees for an optional overdraft service without their consent.

TD Bank will pay US$97-million in restitution to more than 1.4 million customers and a US$25-million civil penalty after the CFPB found the bank used deceptive tactics to charge customers overdraft fees for debit card and ATM transactions without their “affirmative consent” from 2014 to 2018.

The bureau said TD managers instructed employees to “deceptively” present the bank’s optional overdraft service, called Debit Card Advance, as free or to frame it as a feature that “comes with” new chequing accounts the bank opened for customers at branches and offsite events. In fact, TD charged US$35 for each overdraft transaction, and the service was optional.

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In a statement, the chief executive officer of TD’s U.S. arm, Greg Braca, said TD disagrees with the CFPB’s conclusions, but has “co-operated fully to resolve this matter and are moving forward with a continued focus on meeting the needs of our customers.” TD has not admitted to any wrongdoing as part of the settlement.

“Throughout the period in question, TD had a clear process to secure formal consent before providing this service to customers, enabling them to make an informed and conscious choice,” Mr. Braca said, adding that TD “voluntarily and proactively” enhanced its disclosure and enrollment processes for the overdraft product starting in 2014.

The CFPB said that, in some cases, TD employees “deceptively” described the overdraft service as covering transactions that it did not – like paying a mortgage or electricity bill – or “materially interfered” with customers’ ability to understand the terms and conditions. In other instances, customers were asked to sign the overdraft notice with the “enrolled” option pre-checked without employees mentioning the service, or TD staff “deliberately obscured” the notice to stop a customer from reviewing it, according to the CFPB.

The settlement with the CFPB requires TD to “correct” its overdraft enrollment practices.

TD is Canada’s second-largest bank, and has more than 1,200 branches across the eastern United States. The bank will continue to offer the debit-card advance overdraft service, which allows a customer to withdraw more funds than they have in their account to prevent a transaction from being declined. The bank said in its statement that it alerts customers when overdrafts occur, and provides tips to help avoid them.

In the 2018 fiscal year – the last year of the alleged violations – TD’s U.S. retail banking division earned $10.9-billion in revenue, and nearly $4.2-billion in profit.

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