The Consumer Financial Protection Bureau and Office of the Comptroller of the Currency said they had ordered the bank to pay $727 million in relief to consumers to resolve problems with add-on products providing identity theft and payment protection products.
The bank must also pay fines of $20 million to the bureau $25 million to the OCC.
"We have consistently warned companies about illegal practices related to credit card add-on products," bureau Director Richard Cordray said in a statement. "We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market."
The consumer bureau said the bank had misled roughly 1.4 million people about the cost of two credit card payment protection products, which allow consumers to suspend minimum card payments if they lose their job or suffer a severe illness, and the amount of time they would receive benefits from them.
The bank also billed customers for identity protection products before they received them and did not provide some fraud-monitoring services consumers thought they were buying, regulators said. About 1.9 million people were unfairly billed, the consumer bureau said.
Bank of America neither admitted nor denied wrongdoing, the bureau said.
Bank of America said in an emailed statement that it had stopped marketing its identity theft protection products in December 2011 and its payment protection products in August 2012. The bank has also already issued refund payments to most customers who were affected, the statement said.
In recent years, the bureau has been cracking down on credit card companies offering payment protection, credit score tracking and other add-on products. The settlement with Bank of America is the bureau's fifth such case, Cordray said.
Since 2012, Capital One Financial Corp, American Express Co, Discover Financial Services and JPMorgan Chase & Co all have paid fines to resolve allegations of unfair practices involving such products.
(Reporting by Emily Stephenson and Peter Rudegeair, Editing by Franklin Paul and Lisa Von Ahn)
By Emily Stephenson and Peter Rudegeair