On July 14, 2022, the CFPB fined Bank of America $100 million for botching the disbursement of state unemployment benefits at the height of the pandemic. According to the CFPB’s press release, 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. The Office of the Comptroller of the Currency (OCC) is also fining the bank $125 million in a separate order.
From CFPB Director Rohit Chopra’s statement:
“Taxpayers relied on banks to distribute needed funds to families and small businesses to rescue the economy from collapse when the pandemic hit. 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 is a national bank headquartered in Charlotte, North Carolina, with approximately 4,100 branches. It is the second largest bank in the United States, with a total of $2.5 trillion consolidated assets. Bank of America was previously sanctioned by the CFPB. First in 2014, for illegal credit card practices and in May 2022, for unlawful garnishments. The bank was ordered to pay $727 million in redress to its victims and $10 million in civil penalty, respectively.
Bank of America has contracts with several state agencies to deliver unemployment and other benefit payments to consumers electronically through prepaid debit cards and accounts. In the investigation conducted by the CFPB, the agency 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 COVID-19 pandemic. These findings include that the bank:
Replaced reasonable investigations with a faulty fraud filter. In the fall of 2020 through mid-2021, Bank of America implemented a fraud filter investigating prepaid debit card fraud on the unemployment insurance benefit accounts instead of conducting reasonable investigations. The fraud filter used a simple set of flags that automatically triggered an account freeze which froze people’s accounts even if there was no fraud;
Left distressed consumers in the lurch. It was difficult for people to unfreeze their prepaid debit cards or for people to report fraudulent use of their cards due to the bank’s limited schedule for its claim call center; and
Passed the buck to an overwhelmed state agency. The bank often sent consumers seeking assistance back to the California state unemployment department for verification in order to regain access to their benefits even if the bank knew the department was stretched and unable to provide services.
The CFPB is enforcing its authority to take action against Bank of America for violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices, by requiring the bank to:
Provide redress to consumers. The payment to consumer will include the amount wrongly denied to the consumer due to the faulty fraud filter, a lump sum consequential harm payment, and any additional redress through an individualized review process; and
Pay a $100 million fine. Bank of America must pay a $100 million dollar penalty to the CFPB, which will be deposited into the victims relief fund. The OCC is separately fining the bank $125 million to be remitted to the Treasury.
Read the CFPB’s full release here.
The full enforcement action can be found here.