Bank of America is set to pay more than half a billion dollars after a district judge found the lender massively underpaid its deposit insurance fees for more than a year.
In 2017, the FDIC filed a lawsuit against BofA for allegedly failing to pay $1.12 billion in mandatory fees between Q2 of 2013 and Q4 of 2014.
The FDIC also accused BofA of unjustly enriching itself by keeping the money.
According to the lawsuit, BofA failed to accurately report its counterparty exposures, leading to lower risk scores and lower insurance payments.
“In 2016, an FDIC audit revealed that ‘[BofA] had not consolidated its counterparty exposures to the ultimate parent level as required…’ This lowered [BofA’s] concentration measure, which in turn considerably lowered the overall amount that BANA paid in assessments for those quarters.”
BofA argues that it correctly interpreted regulations that were created after the 2008 financial crisis to strengthen the stability of the banking system and enhance risk-based deposit insurance assessments.
The bank also claims it lacked fair notice of the FDIC’s interpretation of the rule, calling the rule itself “arbitrary and capricious and procedurally flawed.”
US District Judge Loren L. Alikhan rejected most of BofA’s arguments while cutting the claim in half.
According to Alikhan, the rule is valid and that the FDIC was right to go after BofA’s underpaid deposit insurance fees. However, the judge says BofA has to pay over $540.26 million plus interest instead of the $1.12 billion sought by the regulator.
“The court agrees with the FDIC that, after reading the text of the 2011 Rule and ‘acting in good faith,’ [BofA] should have been able to ‘identify[] with ascertainable certainty, the standards’ it was expected to apply.”
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