WASHINGTON, April 30 (Reuters) - U.S. bank regulators said on Tuesday they ordered RBS Citizens and an affiliate bank to pay a total of $13.9 million to resolve allegations that they misled customers with their overdraft and rewards programs.
The Office of the Comptroller of the Currency issued a $5 million penalty against RBS Citizens, a subsidiary of Royal Bank of Scotland Group Plc, and ordered it to pay $2.5 million in restitution to 265,000 customers.
The Federal Deposit Insurance Corp entered into a related settlement with Citizens Bank of Pennsylvania, ordering the state bank affiliate to pay a separate $5 million penalty and $1.4 million in restitution to 75,000 affected customers.
The banks neither admitted nor denied any wrongdoing, according to the settlements.
Jim Hughes, a spokesman for RBS Citizens, said the bank takes the results of regulatory exams seriously and has changed the practices identified in the exams.
A representative of Citizens Bank did not immediately respond to a request for comment.
Regulators accused RBS Citizens of violating the Federal Trade Commission Act through its overdraft and checking rewards programs and its process for stopping pre-authorized fund transfers.
The alleged violations occurred between 2007 and 2011, regulators said.
The OCC said the bank did not disclose that it would not transfer funds from a customer's savings account to cover overdrafts in a linked checking account if the savings account could not cover the entire overdrawn balance.
The agency said the bank also told customers that it could stop a transfer if notified three business days before the scheduled payment, but it did not disclose that technical limitations made it unable to stop the transfers during a period of more than two years.
Regulators also said the bank told customers that if they had 10 eligible transactions in their checking account each month, they could get rebates based on the transactions, but it did not disclose the requirements for when those transactions needed to post.
Under the settlement, the OCC ordered the bank to review and update its compliance systems to make sure it complies with consumer protection laws.