The Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) have fined the Bank of America (BofA) for their deficient disbursement of state unemployment benefits during the Covid-19 pandemic.
The OCC fined the bank for $125 million, while the CFPB fined BofA $100 million in response to the bank’s unlawful freezing of customer accounts because of a faulty fraud detection program. BofA then gave the customers little recourse despite the fact that no fraud had taken place. The $100 million fine will be deposited into the victims’ relief fund by the CFPB.
The CFPB has also ordered the banking giant to reimburse their customers along with additional ‘consequential harm’ payment.
Under the Electronic Fund Transfer Act, financial institutions are authorised to deliver unemployment benefits to consumers in the state of California online to their prepaid debit cards and accounts. If consumers report an error, the financial institution is required to conduct an investigation. The CFPB found that the Bank of America engaged in unlawful processes including replacing the investigation they are legally required to perform with ‘faulty fraud filters’ that freeze accounts, inevitably freezing consumer’s unemployment insurance benefits.
The CFPB demands compensation to those who were unlawfully denied unemployment benefits when they were desperately needed, as unemployment rates soared in the US during the pandemic. 2020 also saw numerous cases of credit card fraud and identity theft for Americans, contributing to conclusion of the CFPB investigation: that the Bank of America abused its position and failed its customers.
CFPB director Rohit Chopra announced: “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.”
The Bank of America is the second largest bank in the US, with an estimated $2.5 million in consolidated assets and 4,100 branches. The banking giant is no stranger to fines from the CFPB; it was fined $10 million earlier this year for civil penalty over illegal garnishments, and $727 million in 2014 for unlawful credit card practices.
Earlier this year, CFPB sued Moneygram for violating consumer financial protection laws and charged TransUnion for ongoing unlawful practices.