Federal regulators have assessed penalties totaling $225 million on Bank of America for its handling of state unemployment payments during the pandemic.
Bank of America administered a prepaid card program to distribute unemployment insurance and other public benefit payments for 12 states. The Office of the Comptroller of the Currency said in a statement yesterday that it found “violations of law and unsafe or unsound practices” relating to the bank’s administration of these programs.
The OCC assessed a $125 million civil money penalty against Bank of America and ordered the bank to provide remediation to consumers who were harmed by the bank’s practices, including those whose access to unemployment benefits was denied or delayed. Bank of America administered programs in Arizona, California, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, North Carolina, New Jersey, Nevada and South Carolina.
The OCC said Bank of America did not adequately investigate and resolve consumer claims of unauthorized transactions, and the agency added that it found other deficiencies in the bank’s administration of the program, including in operational processes, risk management and internal controls.
In a separate statement, the Consumer Financial Protection Bureau said it had fined Bank of America $100 million for its handling of the prepaid card program, including its fraud detection process.
“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 CFPB said.
In addition to the fine, the CFPB said Bank of America must pay back money to consumers who had been denied payments because of the fraud filter. The bank must also provide a consequential harm payment to each consumer, and consumers will have the opportunity to go through a further review process for additional redress, the CFPB said. While the enforcement action applies to consumers across the U.S., the CFPB in its statement referred to the experiences of California consumers from the fall of 2020 to mid-2021.
The OCC said remediation to consumers made according to the CFPB order would satisfy the OCC’s order.