WASHINGTON (Reuters) - TCF National Bank was on Thursday accused of "tricking consumers" into costly overdraft services in a lawsuit by the U.S. Consumer Financial Protection Bureau.
According to the lawsuit, Minnesota-based TCF National Bank wrongly pushed customers into a costly overdraft protection that generated hundreds of millions of dollars in revenue.
A spokesman for the bank, a subsidiary of TCF Financial Corp <TCB.N>, denied the charges and said the lender would fight the case in court.
"TCF intends to vigorously defend against the CFPB's allegations, and we believe we have strong, principled defenses," said Mark Goldman in a statement.
According to the suit, bank employees pushed customers to opt into a program. The suit cited as an example a customer who could be charged $35 in fees for a $2 overdraft.
Many customers wrongly thought the service was mandatory rather than optional, according to the complaint.
A 2010 law was meant to ensure bank customers willingly sought overdraft insurance but "TCF bulldozed its way through protections," CFPB Director Richard Cordray said in a statement.
TCF had challenged the 2010 rule in court but dropped its lawsuit in 2011.
Wall Street banks did not join the tiny, Minnesota-based lender in its challenge, but the industry watched closely to see whether new consumer protections could be overturned.
The bank's then-CEO Bill Cooper vocally defended products like overdraft protection and said regulations went too far.
"It is unprecedented for Congress, or any regulatory agency, to mandate a fee charged in the free market," Cooper said when TCF filed its lawsuit.
He argued that the rule pushed fees down below the cost of servicing depositors, forcing banks to run money-losing businesses.
TCF relied on overdraft revenue to a greater degree than many competitors and stood to lose over $180 million a year with the 2010 law, according to Thursday's suit.
TCF operates a network of approximately 360 retail branch
offices in Minnesota, Wisconsin, Illinois, Michigan, Colorado, Arizona and South Dakota, according to the complaint.
(Reporting by Tim Ahmann, Susan Heavey and Patrick Rucker in Washington and Lauren LaCapra in New York; Editing by Cynthia Osterman)