federal banking regulators fined Bank of America on Thursday after finding its fraud filter unlawfully froze customers’ prepaid unemployment insurance benefit accounts, leaving “distressed consumers in the lurch,” according to a statement,
In the fall of 2020 and through mid-2021, Bank of America installed a new automatic system for catching fraud that was faulty and mistakenly froze the accounts of many unemployment benefit recipients amid a surge in the number of jobless Americans during the pandemic.
The Consumer Financial Protection Bureau is fining Bank of America $100 million and the Office of the Comptroller of the Currency is separately fining it $125 million over the problem.
In addition to the fines, the order also requires the bank to pay redress to those impacted by their mistake, which the CFPB estimates could amount to hundreds of millions of dollars.
Twelve states used the unemployment benefits card program, including New Jersey and California, Bloomberg reported,
According to CFPB, Bank of America often directed California customers to the state’s unemployment office, which the bank knew was “stretched” and could not provide them with help.
Bank of America did not deny the findings, but a bank spokesperson told Reuters the states were in charge of reviewing unemployment applications and that penalties occurred “despite the government’s own acknowledgment that the unemployment program expansion during the pandemic created unprecedented criminal activity.”
This is not the first time the North Carolina-based banking giant has been sanctioned by the CFPB. In 2014, the CFPB ordered BofA to pay $727 million to customers affected by illegal credit card practices, and in May of this year it hit the bank with a $10 million penalty for unlawfully garnishing thousands of customers' accounts.
“Taxpayers relied on banks to distribute needed funds to families and small businesses to rescue the economy from collapse when the pandemic hit,” CFPB Director Rohit Chopra said in a statement. “Bank of America failed to live up to its legal obligations. And when it got overwhelmed, instead of stepping up, it stepped back.”
Credit: www.forbes.com /