Bank of America (BAC:NYE) has recently found itself in hot water, as the Consumer Financial Protection Bureau (CFPB) has ordered the banking giant to pay a substantial penalty of $250 million. The allegations against the bank revolve around unauthorized credit card accounts, double fees, and broken promises to customers.
Out of the total penalty amount, $100 million has been earmarked for compensating customers who were adversely affected. Additionally, BAC is expected to remit $90 million to the CFPB and another $60 million to the Office of the Comptroller of the Currency.
Unveiling the Accusations:
The regulator’s investigation revealed one particular transgression committed by Bank of America: the imposition of a $35 fee on customers for declined transactions due to insufficient funds. Shockingly, the CFPB discovered that this fee was repeatedly charged for the same transaction between 2018 and 2022.
Furthermore, it was revealed that BAC employees engaged in the unlawful practice of enrolling consumers in credit card accounts without their consent. This unethical act was motivated by the employees’ desire to meet incentive goals. The unauthorized enrollment of customers has been taking place since 2012, although the bank claims to have eliminated these incentive goals as of the beginning of 2023.
Putting an End to Unscrupulous Practices:
Addressing the issue, CFPB Director Rohit Chopra emphasized the illegality of such practices and their detrimental impact on customer trust. He stated, “These practices are illegal and undermine customer trust. The CFPB will be putting an end to these practices across the banking system.”
Is BAC Stock A Safe Investment Option?
As investors assess the situation, it is essential to consider the future prospects of BAC stock. Jefferies analyst Ken Usdin, in anticipation of the bank’s second-quarter earnings release scheduled for July 18, has reiterated a Hold rating on BAC stock. However, he has adjusted the price target from $33 to $30.
BAC Stock-Analyst Ratings:
Looking at the analyst consensus, BAC stock is currently considered a Buy, based on eight Buy, six Hold, and two Sell ratings. The average BAC stock price target stands at $34.39, suggesting a potential upside of 18.5%.
For investors seeking the most accurate and profitable insights, Credit Suisse analyst Susan Roth Katzke might be worth following. By mirroring her trades on BAC stock and maintaining each position for a year, investors could potentially generate a profit in 69% of their transactions, with an average return of 31.37% per trade.
The Takeaway:
Looking ahead, it is imperative for Bank of America to rectify the issues highlighted by the CFPB, rebuild customer trust, and uphold a commitment to ethical practices. Transparency, accountability, and a focus on restoring confidence among customers and investors will be key in the bank’s journey toward long-term success.
