Bank Left Struggling Americans in the Lurch by Wrongfully Freezing Accounts
WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) fined Bank of America $100 million for botching the disbursement of state unemployment benefits at the height of the pandemic. Bank of America automatically and unlawfully froze people’s accounts with a faulty fraud detection program, and then gave them little recourse when there was, in fact, no fraud. Today’s order requires Bank of America to undertake a process that is estimated to result in hundreds of millions of dollars in redress to consumers. In a separate order, the Office of the Comptroller of the Currency (OCC) is also fining the bank $125 million.
“Taxpayers relied on banks to distribute needed funds to families and small businesses to rescue the economy from collapse when the pandemic hit,” said CFPB Director Rohit Chopra. “Bank of America failed to live up to its legal obligations. And when it got overwhelmed, instead of stepping up, it stepped back.”
Bank of America (NYSE: BAC) is a national bank headquartered in Charlotte, North Carolina, with approximately 4,100 branches. It has been designated as a global systemically important bank by the Financial Stability Board, and as of December 31, 2021, the company had $2.5 trillion in consolidated assets, which makes it the second largest bank in the United States. The bank has previously been sanctioned by the CFPB. In 2014, the CFPB ordered Bank of America to pay $727 million in redress to its victims for illegal credit card practices. And in May of this year, the CFPB ordered Bank of America to pay a $10 million civil penalty over unlawful garnishments.
Bank of America has contracts with various state agencies to deliver unemployment and other benefit payments to consumers electronically through prepaid debit cards and accounts. For example, since 2011, Bank of America has had an exclusive contract with the State of California to deliver unemployment and other benefit payments to California consumers electronically through prepaid debit cards and accounts. Under the Electronic Fund Transfer Act, consumers are protected when they use electronic methods to transfer money; this includes prepaid cards. Protections include that after a consumer contacts the financial institution that there has been an error, the financial institution must conduct a prompt, reasonable, and timely investigation.
When the COVID-19 pandemic hit in early 2020, the unemployment rate surged. Millions of consumers sought unemployment insurance benefits. The surge included a great deal of fraud. There was a significant amount of identity theft that affected eligible cardholders with legitimate prepaid debit card accounts but there were also a significant number of criminals who applied for and began receiving unemployment insurance benefits who filed false error claims to access additional funds.
In its investigation, the CFPB found that Bank of America engaged in unfair and abusive acts and practices that resulted in Californians not getting their unemployment benefits at the height of the pandemic, when many people needed the money the most. Specific findings include that the bank:
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. Bank of America will be required to:
Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov.
If you want to republish the article or have questions about the content, please contact the press office.
Subscribe to receive our press releases.
Subscribe to our RSS feed to get the latest content in your reader.